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Ecolab Invests in Aquatech International to Improve Processes

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Price movement

Ecolab (ECL) has a market cap of $35.6 billion. It fell by 0.26% to close at $120.95 per share on July 15, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 1.5%, 2.3%, and 6.4%, respectively, on the same day. ECL is trading 2.1% above its 20-day moving average, 2.5% above its 50-day moving average, and 6.9% above its 200-day moving average.

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Related ETF and peers

The PowerShares Water Resource Portfolio (PHO) invests 7.5% of its holdings in Ecolab. The ETF tracks a modified, liquidity-weighted index of US-listed companies that create products to conserve and purify water. The YTD price movement of PHO was 12.0% on July 15.

The market caps of Ecolab’s competitors are as follows:

  • 3M Company (MMM)—$110.2 billion
  • Danaher Corporation (DHR)—$55.7 billion
  • ServiceMaster Global Holdings (SERV)—$5.5 billion

Latest news on Ecolab

In a press release on July 15, 2016, Ecolab stated the following: “Ecolab Inc., the parent company of Nalco Water, has made a minority equity investment in Aquatech International. Aquatech also provides a suite of industry-leading technologies for the reuse and recycling of water in the most demanding of industrial settings.”

It also noted, “Through this relationship, Nalco Water, a global leader in industrial water treatment solutions and services, increases its leading capabilities to provide customers with comprehensive end-to-end solutions to minimize net water usage and maximize process performance and productivity.”

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Ecolab’s performance in fiscal 1Q16

Ecolab reported fiscal 1Q16 net sales of $3.1 billion—a fall of 6.1% from its net sales of $3.3 billion in fiscal 1Q15. Sales from the Global Industrial and Global Institutional segments rose by 4.0% and 7.5%, respectively, and sales from Global Energy fell by 14.7% between fiscal 1Q15 and fiscal 1Q16. During that same period, the company’s cost of sales as a percentage of net sales and operating income fell by 1.9% and 4.2%, respectively.

Its net income fell to $230.8 million in fiscal 1Q16, as compared to $233.4 million in fiscal 1Q15. It reported EPS (earnings per share) of $0.77 in fiscal 1Q15 and 1Q16.

Ecolab’s cash and cash equivalents rose by 12.9%, and its inventories fell by 7.8% between fiscal 1Q15 and fiscal 1Q16. Its current and debt-to-equity ratios fell to 1.0x and 1.76x, respectively, in fiscal 1Q16, as compared to 1.2x and 1.77x, respectively, in fiscal 1Q15.

Projections

The company has made the following projections for fiscal 2016:

  • adjusted gross margin of 47%–48%, which excludes special gains and charges
  • net interest expenses of ~$270 million
  • adjusted tax rate of ~26%
  • noncontrolling interest of $0.06–$0.10
  • adjusted EPS of $4.35–$4.55, excluding special gains and charges

The company has made the following projections for fiscal 2016:

  • adjusted gross margin of ~48%, which excludes special gains and charges
  • net interest expenses of ~$67 million
  • adjusted tax rate of ~26%
  • noncontrolling interest of $0.01–$0.02
  • adjusted EPS of $1.03–$1.11, excluding special gains and charges
  • share repurchase of ~$700 million in 1H16

In the next part of this series, we’ll discuss the Coca-Cola Company (KO).

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