Ecolab CEO sees momentum after company records 7% profit growth for second quarter

Economic conditions still present challenges for large manufacturers like Ecolab.

But the St. Paul-based maker of cleaning and hygiene solutions doubled down on its business strategies to counter inflation and other cost pressures, delivering a second quarter with 7% growth year-over-year on profits.

"The second quarter was one of great momentum for Ecolab, reflecting the strategic decisions made over the past few years and the fundamental work done over the last several quarters," Christophe Beck, the company's chief executive said in a news release.

Next up: the company's global health care business, which represents 5% of revenue.

The segment has been a lag on Ecolab's overall results for a while. The company last week announced internally plans to split the North American portion of the business into two: infection prevention and surgical products.

Separating the businesses will give Ecolab more options in the future, Beck said during the company's quarterly conference call with analysts.

The surgical products business makes drapes that protect equipment and patients and will become a focused stand-alone business. The infection prevention business will be a separate division but utilize the company's larger institutional sales force.

No impact on employment is expected from the changes, the company said.

But the decisions will help in the long term, Beck said.

The company is projecting strong sales growth for the remainder of the year and growth in adjusted earnings in the mid-teens. The focus on fundamentals has helped increase the company's second-quarter margins by 130 basis points over the same period a year ago.

"Protecting what's vital — people and vital resources — what we do is more important than it's ever been," Beck said in an interview. "So we have the best team, great momentum, a future that's here for us to grab."

Second-quarter results met analyst expectations. Net income was $329.7 million, or $1.15 a share, on revenue that grew 8% to $3.9 billion.

Sales in the health care and life sciences businesses were flat, while the institutional and specialty business saw revenue increase 13%.

In October 2021 Ecolab made a big bet on the life sciences industry by acquiring Pennsylvania-based Purolite for $3.7 billion. The acquisition was attractive because Purolite had been growing in the mid-teens.

But integration of the business into Ecolab's overall structure has been slower than expected. Plus, the market for Purolite high-end ion exchange resins — which separate and purify solutions used in making pharmaceuticals and other products — has been soft.

"Our highly attractive life sciences business was not immune to the short-term market pressure, which led to flattish sales," Beck said. "However, we took the opportunity to gain share with major customers and to further invest in capacity and capabilities in biopharma, which resulted in a short-term operating income decline."

Earlier this year, Ecolab announced plans to build a new biologics resin manufacturing facility for Purolite that will increase capacity and add about 150 jobs in Pennsylvania.

"The industry is a bit under pressure, because it's on the back end of all what happened with COVID with higher inventories with higher investments," Beck said.

The softness may remain for a few more quarters, he said, but added he remains confident in the attractive long-term growth trends and higher margins in the life sciences industry.

Shares of Ecolab closed Tuesday at $185.17, up 1%.