Ecolab 2Q16 Earnings Call Notes

Ecolab (ECL) Douglas M. Baker on Q2 2016 Results

Not too much has changed. Bigger hit to Europe is terrorism rather than Brexit

“U.S., I would say isn’t much different than we expected this year. We never have high expectations. We always go into these years thinking that growth is going be more similar in the past couple years – and there’s no magic second-half inflection point – seems to be regularly forecast but rarely realized. So U.S., we haven’t seen a huge change. I think there is a bit of a consumer spend hiccup in April, May but that seems to have evened out a bit. In terms of Europe, I don’t know that – I would say the more – the bigger impact in the near-term has been around – from terrorism, not British exit. And I think British exit may well indeed have significant impact on Europe in total. I guess it’s too early to recognize that at this point in time.”

Current oil price weakness is seasonal, predicted by many, supply and demand is the important factor

“We do believe that you continue to have the correction that we’ve been seeing in terms of supply and demand in the overall oil market. That continues to narrow which we believe is the metric to watch more so than price. Price has seasonal components to it too. We believe that we are likely to see softening of price as the summer ended. It was predicted by many in the industry. I know many are acting surprised, but that was a common prediction and so we still think that the key metrics are supply and demand. They are narrowing. That’s what’s going to drive correction and price over any period of time, but we don’t see any real activity recovery until 2017.”

Not expecting price improvements in Energy until 2018, 2019

” I wouldn’t expect – what I’m talking about in terms of – we think third quarter is probably our peak pain in terms of pricing year-on-year. We’re still going to have negative pricing for a few quarters after that before you start annualizing against the price concessions that we’ve made in the industry. But we don’t expect that we’re going to have price increases, and I’m talking broadly. Will there be one exception? I’m sure there will be. But broadly in the energy market in 2017, we think that’s more likely a 2018 and 2019 story as that market heals, recovers, and activity levels have to ramp up significantly in those years to fill in the hole that’s been created by the capital that’s been yanked out of this industry.”

Michael J. Monahan – Senior Vice President External Relations

Seeing a bottoming of the energy cycle

“While Energy segment results have been challenging, we believe that recent trends suggest the bottoming of our energy cycle, and we expect second half Energy segment sequential results to reflect that stabilization. We look for the market recovery to begin gradually and take hold in 2017 and improve through 2018 and 2019, and for the Energy segment to show results reflecting that market improvement.”