ECOLAB INC. Q1 FY2025 earnings call

• End market trends softened, particularly in heavy industrial, but Ecolab outperformed due to critical technologies and cost reduction for customers. • Strong new business in Q1, broad-based wins globally. • Leveraging local-for-local strategy to navigate global trade challenges, with a 5% rate surcharge in the US to mitigate tariff impacts. • Investments in growth engines: Life Sciences, Pest Intelligence, Global High-Tech, and Ecolab Digital. Life Sciences is growing mid single-digits organic sales with over 30% organic operating income growth. Pest Elimination is deploying Pest Intelligence, expecting margin improvement in Q2. Global High-Tech Water is growing near 30%. Ecolab Digital is accelerating growth with strong subscription revenue.

Life Sciences, now a standalone segment, grew organic sales mid single-digits and delivered organic operating income growth of more than 30%. The biopharma business within Life Sciences grew sales double-digits. Pest Elimination is rapidly deploying Pest Intelligence, its proprietary digital solution, with growth and operating income impact near-term but expected to improve margins. Global High-Tech Water business continued to perform exceptionally well, with sales growth accelerating to nearly 30%. Ecolab Digital grew sales 12% to $80 million in the first quarter, with annualized sales of $320 million, driven by strong subscription revenue growth.

• Maintained overall earnings expectations for the year. • Anticipates organic sales growth in Q2 to be similar to or slightly better than Q1, with acceleration in the second half. • Life Sciences expected to accelerate long-term growth and aim for 30% operating income margin. • Pest Elimination margins expected to get closer to 20% in Q2.

• Softer end market demand, especially in heavy industrial. • Rapid changes in international trade policies impacting cost of raw materials, packaging, and equipment. • Previous safety issues in Pest Elimination impacting profitability, though improving.

Q: Chris Parkinson asks about enthusiasm for growth engines and go-to-market strategy.

A: Christophe Beck expresses enthusiasm for data center cooling business, with unique cooling expertise and fluids monitoring capabilities, growing fast with great margins.

Q: Shlomo Rosenbaum asks about Pest Elimination growth acceleration and agentic.ai usage.

A: Christophe Beck expects Pest Elimination growth to accelerate in H2 2025 and beyond, with Scott Kirkland adding agentic.ai is used in One Ecolab for lead to cash processes.

Q: John Roberts asks if the surcharge is primarily for dispensing equipment.

A: Scott Kirkland responds the surcharge is broad-based, including chemistry and packaging from China, not just equipment, with manageable impact mitigated through value delivery to customers.