Ecolab Inc. (ECL) reported fourth quarter earnings of $115.8 million, compared to $80.0 million in the year-ago quarter. Excluding special items, adjusted earnings per share came in at 55 cents, which narrowly missed the Zacks Consensus Estimate of 56 cents per share.
The worse-than-expected results was primarily attributable to the adverse impact of severe macroeconomic headwinds on Ecolab’s foodservice and hospitality markets.
Ecolab also stated that its end markets are unlikely to witness a significant recovery of demand in 2010. Accordingly, the company expects adjusted earnings of 36 to 40 cents per share in the first quarter of 2010, which is below the Zacks Consensus Estimate of 44 cents, derived from 8 covering analysts.
For full-year 2010, Ecolab anticipates adjusted earnings of $2.17 to $2.25 per share assuming a modest growth in sales. This guidance is also below the Zacks Consensus Estimate of $2.26 derived from 17 covering analysts. Shares of Ecolab have slipped more than 5% in Thursday trading to below $42 per share on the NYSE.
Meanwhile, net sales for the quarter grew by 5.5% to $1.56 billion from $1.48 billion in the year-ago period. The growth was primarily caused by favorable foreign currency translations coupled with a 4% and 1% constant currency increase in the U.S. Cleaning & Sanitizing and International segments, respectively.
Ecolab’s quarterly gross margin expanded 200 basis points (bps) to 50.1% from 48.1% in the prior-year quarter mainly due to favorable pricing, cost saving initiatives and lower raw material costs. Operating margin increased by 310 bps to 12.5%, primarily due to improved gross margin coupled with lower write-downs and business structure optimization related costs.
At the end of the quarter, Ecolab had cash and cash equivalents of $73.6 million and long-term debt of $868.8 million, compared to $66.7 million of cash and $799.3 million of long-term debt in the year-ago quarter. During the quarter, the company also bought back 1.2 million shares under its existing share repurchase program.
Ecolab is a leading provider of cleaning, sanitizing, food safety and infection prevention products and services. The company’s target market includes foodservice, food and beverage processing, healthcare, and hospitality markets in more than 160 countries.
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