Ecolab Inc (ECL) reported results for the third quarter of fiscal 2009 with earnings of 61 cents per share. Earnings were above the Zacks Consensus Estimate of 59 cents per share and up 11% year-over-year. Earnings were driven by new products and account gains, pricing, cost savings, partially offset by investments in the strategic growth areas.
Net sales for the quarter declined 4.9% year-over-year to $1.5 billion, as the benefits of pricing were fully offset by declines in volume and mix and adverse impact of currency translation.
By segments, Ecolab’s U.S. Cleaning & Sanitizing operations were almost flat year-over-year. The U.S. Other Services segment sales declined 6% to $118 million and the company’s International operations segment sales declined 9% year-over-year.
Gross margins for the quarter expanded 190 basis points to 50.6% versus 48.7% in the comparable prior-year quarter. Benefits from pricing and cost savings efforts fully offset the impact of recession and unfavorable foreign exchange. The operating margin expanded 204 bps to 14.4% from 12.4% in the comparable prior-year quarter. Moreover, management states that the company’s balanced business mix has provided the required stability during the difficult economy in 2009. Further, a steady demand from the food and beverage, food retail and health care markets, as well as increased sanitizer demand due to H1N1, has balanced the declines in lodging and foodservice. Based on the performance on the results year-to-date, management has narrowed its earnings guidance. Annual earnings are now expected to be in the range of $1.98 to $2.01 per share compared to $1.96 to $2.02 stated earlier. For the fourth quarter, management expects sales to increase modestly. Currency translation is expected to have a favorable effect on sales. Currency is also expected to have a favorable impact of approximately 2 cents on fourth quarter adjusted earnings. Quarterly earnings are expected to be in the range of 54 cents to 57 cents. Fourth quarter special gains and restructuring charges are expected to be approximately 1 cent to 3 cents per share.
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