Ecolab Announces Strong Fourth Quarter Performance and 2024 Outlook, Reported Diluted EPS $1.41, Adjusted Diluted EPS $1.55, +22%, 2024 Adjusted Diluted EPS Outlook, $6.10 to $6.50, +17% to 25%

ST. PAUL - Ecolab Announces Strong Fourth Quarter Performance and 2024 Outlook, Reported Diluted EPS $1.41, Adjusted Diluted EPS $1.55, +22%, 2024 Adjusted Diluted EPS Outlook, $6.10 to $6.50, +17% to 25%

FOURTH QUARTER HIGHLIGHTS

Reported sales $3.9 billion, +7% versus last year. Organic sales +6%, led by double-digit growth in the Institutional & Specialty segment and Pest Elimination, and solid Industrial segment growth. As expected, Healthcare & Life Sciences segment sales were stable versus last year but continued to show good sequential sales growth.

Reported operating income +48%. Organic operating income +21%, driven by continued strong pricing, volume growth and moderately lower delivered product costs.

Reported operating income margin 15.0%. Organic operating income margin 16.0%, +200 bps reflecting continued robust gross margin expansion led by value-based pricing.

Reported diluted EPS $1.41, +52%. Adjusted diluted EPS, excluding special gains and charges and discrete tax items were $1.55, +22%.

Full-year 2023 cash flow from operating activities $2.4 billion. Full-year 2023 free cash flow $1.6 billion, resulting in free cash flow conversion of 118%.

OUTLOOK

1Q 2024: Expect first quarter 2024 adjusted diluted earnings per share in the $1.27 to $1.37 range, +44% to 56% versus last year reflecting short-term benefits from lower delivered product costs.

2024: Expect full year 2024 adjusted diluted earnings per share in the $6.10 to $6.50 range, +17% to 25% versus last year.

CEO Comment

Christophe Beck, Ecolab's chairman and chief executive officer, said, '2023 was a phenomenal year for Ecolab, with our team delivering robust sales growth, significant operating margin expansion and very strong growth in adjusted diluted earnings per share. Our team won a significant amount of new business that helped to offset continued soft macro demand, launched a strong pipeline of new breakthrough technologies, drove pricing backed by strong customer value, and further improved our underlying productivity by leveraging our leading digital capabilities. All of this is the result of the work we have done over the last few years to further strengthen Ecolab's key long-term growth drivers.

'We are confident 2024 will be another strong year for Ecolab, continuing our long-term 12-15% earnings growth trajectory that is amplified by shorter-term benefits from moderately lower delivered product costs. While macroeconomic conditions remain unpredictable, we are well positioned to drive growth through our 'circle the customer, circle the globe' enterprise selling model and proven value proposition, that helps customers improve their operational performance, while reducing their water and energy consumption. We expect another very strong year of operating margin expansion, building upon our success in 2023, and remain confident in our path to deliver on our 20% margin objective over the next few years to drive superior earnings growth and long-term returns for shareholders.'

Fourth Quarter 2023 Consolidated Results

Ecolab's fourth quarter reported sales increased 7% and organic sales increased 6% when compared to the prior year.

Fourth quarter 2023 reported operating income increased 48% including the impact of special gains and charges, which were a net charge primarily related to restructuring costs. Organic operating income increased 21%, as robust pricing and moderately lower delivered product costs more than offset investments in the business including incentive compensation.

Reported other income increased in the fourth quarter of 2023 as modestly higher pension costs were more than offset by the comparison to last year's $26 million settlement expense related to U.S. pension plan lump-sum payments to retirees.

Reported interest expense increased 1% reflecting the impact from higher average interest rates on outstanding debt.

The reported income tax rate for the fourth quarter of 2023 was 23.6% compared with the reported rate of 16.2% in the fourth quarter of 2022. Excluding special gains and charges and discrete tax items, the adjusted tax rate for the fourth quarter of 2023 was 21.3% compared with the adjusted tax rate of 18.2% in the fourth quarter of 2022. The increase in the fourth quarter tax rate was due to changes in the geographic mix of income and timing of tax planning.

Reported net income increased 53% versus the prior year. Excluding the impact of special gains and charges and discrete tax items, adjusted net income increased 22% versus the prior year.

Reported diluted earnings per share increased 52% versus the prior year. Adjusted diluted earnings per share increased 22% when compared against the fourth quarter of 2022.

Currency translation had a $0.02 favorable impact on earnings per share in the fourth quarter of 2023.

Business Outlook

2024

Ecolab expects full year 2024 adjusted diluted earnings per share in the $6.10 to $6.50 range, rising 17% to 25% compared with adjusted diluted earnings per share of $5.21 in 2023. This forecast assumes soft but stable macroeconomic demand and lower delivered product costs in the first half of the year as global inflation eases. Higher interest expense, pension expense and foreign currency translation are estimated to have a combined $0.05 per share unfavorable impact in 2024.

Against this backdrop, Ecolab expects sales growth, driven by new business gains and continued value-based pricing, SG&A productivity through the year, and attractive operating income margin expansion. This strong performance is expected to result in quarterly adjusted diluted earnings per share growth that progressively normalizes towards the upper-end of Ecolab's long-term 12-15% target as favorability from lower delivered product costs is only assumed in the first half of the year.

The company currently expects quantifiable special charges in 2024 to be approximately $0.10 to $0.15 per share, principally related to restructuring charges. Other than the special gains and charges noted above, other such amounts are not currently quantifiable.

2024 - First Quarter

Ecolab expects first quarter 2024 adjusted diluted earnings per share in the $1.27 to $1.37 range, rising 44% to 56% compared with adjusted diluted earnings per share of $0.88 a year ago.

The company currently expects quantifiable special charges in the first quarter of 2024 to be approximately $0.08 per share, principally related to restructuring charges. Other than the special gains and charges noted above, other such amounts are not currently quantifiable.

About Ecolab

A trusted partner for millions of customers, Ecolab (NYSE:ECL) is a global sustainability leader offering water, hygiene and infection prevention solutions and services that protect people and the resources vital to life. Building on a century of innovation, Ecolab has annual sales of $15 billion, employs more than 48,000 associates and operates in more than 170 countries around the world. The company delivers comprehensive science-based solutions, data-driven insights and world-class service to advance food safety, maintain clean and safe environments, and optimize water and energy use. Ecolab's innovative solutions improve operational efficiencies and sustainability for customers in the food, healthcare, life sciences, hospitality and industrial markets.

Ecolab will host a live webcast to review the fourth quarter earnings announcement today at 1:00 p.m. Eastern Time. The webcast, along with related materials, will be available to the public on Ecolab's website at www.ecolab.com/investor. A replay of the webcast and related materials will be available at that site.

Cautionary Statements Regarding Forward-Looking Information

This news release contains certain statements relating to future events and our intentions, beliefs, expectations and predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Words or phrases such as 'will likely result,' 'are expected to,' 'will continue,' 'is anticipated,' 'we believe,' 'we expect,' 'estimate,' 'project,' 'may,' 'will,' 'intend,' 'plan,' 'believe,' 'target,' 'forecast' (including the negative or variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding macroeconomic conditions, delivered product costs, demand, inflation, and our financial and business performance and prospects, including sales, earnings, special charges, margins, pricing, productivity and new business. These statements are based on the current expectations of management of the company. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this news release. In particular, the ultimate results of any restructuring initiative depend on a number of factors, including the development of final plans, the impact of local regulatory requirements regarding employee terminations, the time necessary to develop and implement the restructuring initiatives and the level of success achieved through such actions in improving competitiveness, efficiency and effectiveness.

Additional risks and uncertainties that may affect operating results and business performance are set forth under Item 1A of our most recent Form 10-K, and our other public filings with the Securities and Exchange Commission (the 'SEC'), and include the impact of economic factors such as the worldwide economy, interest rates, foreign currency risk, reduced sales and earnings in our international operations resulting from the weakening of local currencies versus the U.S. dollar, demand uncertainty, supply chain challenges and inflation; the vitality of the markets we serve; exposure to global economic, political and legal risks related to our international operations, including geopolitical instability and the escalation of armed conflicts; our ability to successfully execute organizational change and management transitions; information technology infrastructure failures or breaches in data security; difficulty in procuring raw materials or fluctuations in raw material costs; the occurrence of severe public health outbreaks not limited to COVID-19; our ability to acquire complementary businesses and to effectively integrate such businesses; our ability to execute key business initiatives; our ability to successfully compete with respect to value, innovation and customer support; pressure on operations from consolidation of customers or vendors; restraints on pricing flexibility due to contractual obligations and our ability to meet our contractual commitments; the costs and effects of complying with laws and regulations, including those relating to the environment, climate change standards, and to the manufacture, storage, distribution, sale and use of our products, as well as to the conduct of our business generally, including labor and employment and anti-corruption; potential chemical spill or release; our commitments, goals, targets, objectives and initiatives related to sustainability; potential to incur significant tax liabilities or indemnification liabilities relating to the separation and split-off of our ChampionX business; the occurrence of litigation or claims, including class action lawsuits; the loss or insolvency of a major customer or distributor; repeated or prolonged government and/or business shutdowns or similar events; acts of war or terrorism; natural or man-made disasters; water shortages; severe weather conditions; changes in tax laws and unanticipated tax liabilities; potential loss of deferred tax assets; our indebtedness, and any failure to comply with covenants that apply to our indebtedness; potential losses arising from the impairment of goodwill or other assets and other uncertainties or risks reported from time to time in our reports to the SEC. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this news release may not occur. We caution that undue reliance should not be placed on forward-looking statements, which speak only as of the date made. Ecolab does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in expectations, except as required by law.

Contact:

Andrew Hedberg

Tel: [phone]

Cairn Clark

Tel: [phone]

Nigel Glennie

Tel: [phone]

(C) 2024 Electronic News Publishing, source ENP Newswire