Ecolab Inc.

Greetings and welcome to Ecolab's third quarter 2020 earnings release conference call. At this time, all participants are in listening mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, the conference is being recorded. It is now my pleasure to introduce your host, Mike Monahan. Thank you, Mr. Monahan. You may now begin.

Thank you. Hello, everyone, and welcome to Ecolab's third quarter conference call. With me today is Doug Baker, Ecolab's chairman and CEO, Christoph Beck, our president and chief operating officer, and Dan Schmeckel, our chief financial officer. A discussion of our results, along with our earnings release and the slides referencing the quarter's results and our outlook, are available on Ecolab's website at ecolab.com slash investor. Please take a moment to read the cautionary statements in these materials, which state that this teleconference and the associated supplemental materials include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the Risk Factors section in our September 25, 2020 Form 8K and in our posted materials. We also refer you to the supplemental diluted earnings per share information in the release. Starting with a brief overview... Third quarter results showed significant improvement from the second quarter, while still reflecting the divergent impacts from COVID-19 on the business segments. Fixed currency sales and earnings per share declines narrowed as we leveraged recovering customer and markets with new business wins, increased customer penetration, and cost efficiency actions to show the sequentially better results. Sales and income for our healthcare and life sciences segment were strong as it continued to benefit from good underlying business trends, strong cleaning and sanitizing demand, and several large one-time sanitizer orders. Our industrial segment saw a modest sales decline as end market activity returns toward more normal levels, while income growth continued to be strong due to pricing and lower costs. Institutional division results also improved from the second quarter as consumer activity within restaurants, hotels, and entertainment facilities continued to recover, though traffic at them continues to run below last year due to COVID-related restrictions that yielded the lower institutional segment results. We expect our overall improvement to continue in the fourth quarter, though likely at a slower rate as the second COVID wave impacts reopenings. We remain confident we will emerge from 2020 with the stronger competitive advantages and the more robust product offering. We continue to invest in the key drivers for our business. Our accelerated investments in hand care and sanitizing capacity are paying off, and our continued digital investments and accelerated field technology deployment are enabling us to provide excellent customer support even where we cannot be there in person, while also enabling better value delivery and further efficiency in our cost to serve. We remain firmly focused on maximizing our post-COVID position. While COVID-19 creates a near-term challenge, it also creates long-term opportunities. In a world challenged by COVID, our food safety, clean water, and healthy environments positioning has become even more important. We believe that our long-term growth opportunities remain robust, driven by our huge remaining market opportunity, our leading global market positions, our focus on providing our strong customer base with improved results while lowering their water, energy, and other operating costs, and our strong financial position with resilient free cash flow. We believe looking beyond the near-term uncertainty and focusing on these sustainable long-term business drivers will yield superior long-term performance for Ecolab and our investors. And now here's Doug Baker with some comments.

Thanks, Mike, and good day, everybody. So our sales and earnings showed significant improvement in Q3 versus the lows we saw in Q2, which was expected. This was led principally by our institutional division as its markets reopened, albeit partially. Our healthcare life science businesses continued to accelerate with our third quarter sales up 29%, and our industrial businesses performed solidly as well with negative 3% sales but 18% OI growth. Importantly, we expect the overall improvement to continue in Q4, though at a slower pace, as COVID's second wave is expected to dampen reopenings. Even so, we have a number of initiatives underway as the opportunities and challenges presented by COVID are much clearer now. We have a heavy upfront investment in hand care and sanitizer production, which is now coming online and starting to pay off. Our launch of new antimicrobial with best-in-class 30-second COVID-19 kill claims are well-timed. It's just going out now. Our continued investments in digital and our accelerated rollout of our newest field technology is paving the way for further efficiencies and our costs to serve, which we are capitalizing on now through targeted cost savings programs. Finally, Our new business efforts continue to drive really good results, particularly in institutional. Our ability to dramatically outperform our competition in terms of customer care during the COVID period is being rewarded with new business across the board. And our new Ecolab Science Certified Program is helping drive improved penetration in existing customers. If you recall, our objective for this year was to maximize our position for post-COVID success, and we are well on our way to do that. As a result, we feel we'll be in very good position leaving the year. As we look forward, we expect COVID to run into 2021 fairly deeply, meaning through several quarters. But we also expect our business to continue and strengthen as our capacity, innovation, new market entries, Ecolab science certified, and digital efforts put us in a great position to manage and grow our business. So I feel really good about the steps our team has taken, how they've managed through this period, and most importantly, how they've positioned us for success in 2021. Thank you.