Ecolab announced it has deconsolidated its Venezuela operations, with
this action to be reflected in fourth quarter 2015 special charges and
the year-end balance sheet. Ecolab also provided comments regarding its
2016 earnings outlook.
Venezuela deconsolidation
Douglas
M. Baker, Jr., Ecolab’s chairman and chief executive officer, commented
on the Venezuela deconsolidation, saying, “Continued deteriorating
economic conditions and currency exchange control regulations have
significantly limited the ability of our Venezuelan businesses to
maintain normal operations. We expect these conditions to remain
challenging for the foreseeable future, and we are deconsolidating the
operations to reflect our diminished ability to influence effective
control over business operations in Venezuela.”
This change in accounting treatment, in which Ecolab will stop
consolidating the results of its local Venezuelan operations in the
first quarter 2016 income statement, does not directly affect the local
operations of our Venezuelan businesses. Ecolab expects to continue to
serve customers in Venezuela after the deconsolidation. Sales for the
Venezuela business were approximately $200 million in 2015.
The deconsolidation will result in an estimated $120 million pretax
special charge in the fourth quarter 2015. Ecolab previously announced
2015 special charges totaling $155 million related to Venezuela’s
bolivar devaluation. The combined impact of the Venezuela bolivar
devaluation and deconsolidation on operating results is expected to
represent a total year-on-year 2016 headwind of approximately $0.17 per
share.
Outlook
Baker continued,
saying, “Ecolab has enjoyed strong business growth in 2015, achieving
solid mid-single digit fixed currency sales gains and robust margin
expansion in our Institutional, Industrial and Other segments, more than
offsetting Energy’s performance, to deliver anticipated low-teens
earnings growth before the effects of currency translation. However, as
previously discussed, currency exchange is expected to represent an
estimated $0.33 per share headwind in 2015, unfavorably impacting
otherwise very strong operating results.
“While we will provide formal guidance when we release our fourth
quarter 2015 results, we expect 2016 to show a similar solid operating
performance, along with continued significant currency headwinds. We
expect currency translation to be an unfavorable $0.23 to $0.28 per
share (totaling approximately $0.40 to $0.45 per share when combined
with the Venezuela impact). We look for further good fixed currency
sales and earnings growth in our Institutional, Industrial and Other
segments, with an improved performance by Energy, particularly in its
second half when comparisons reflect the majority of 2015’s energy
market decline. We will maintain our focus on business growth, new
products and continued aggressive cost efficiency efforts throughout our
operations, and expect further operating margin expansion.
“We will also invest in our key business drivers and pursue acquisitions
that provide new technologies, products and services and geographic
expansion. With these investments, share repurchases to maintain our
current leverage ratios, and higher interest rates, we expect a moderate
increase in interest expense.”
Ecolab will announce results for its fourth quarter 2015 and host a live
webcast to review them on February 23, 2016. Ecolab will also provide
additional detail on its 2016 forecast at that time.
About Ecolab
A trusted partner at more than one million customer locations, Ecolab
(ECL) is the global leader in water, hygiene and energy technologies and
services that protect people and vital resources. With 2014 sales of $14
billion and 47,000 associates, Ecolab delivers comprehensive solutions
and on-site service to promote safe food, maintain clean environments,
optimize water and energy use and improve operational efficiencies for
customers in the food, healthcare, energy, hospitality and industrial
markets in more than 170 countries around the world. For more Ecolab
news and information, visit www.ecolab.com.
Cautionary Statements Regarding Forward-Looking Information
This
communication contains certain statements relating to future events and
our intentions, beliefs, expectations and predictions for the future
which are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Words or phrases such
as “will likely result,” “are expected to,” “will continue,” “is
anticipated,” “we believe,” “we expect,” “estimate,” “project,” “may,”
“will,” “intend,” “plan,” “believe,” “target,” “forecast” (including the
negative or variations thereof) or similar terminology used in
connection with any discussion of future plans, actions or events
generally identify forward-looking statements. These forward-looking
statements include, but are not limited to, statements regarding our
financial and business performance and prospects, including forecasted
2015 and 2016 full-year financial and business results, including sales
and earnings growth; margins; business investments and acquisitions;
share repurchases; interest expense; foreign currency translation and
the transaction impact of foreign currency; special gains and charges,
including the impact of the Venezuela bolivar devaluation and
deconsolidation; and business conditions and continued service of
customers in Venezuela. These statements are based on the current
expectations of management of the company. There are a number of risks
and uncertainties that could cause actual results to differ materially
from the forward-looking statements included in this communication.
Additional risks and uncertainties that may affect operating results and
business performance are set forth under Item 1A of our most recent Form
10-K, and our other public filings with the Securities and Exchange
Commission (the "SEC") and include the vitality of the markets we serve,
including the impact of oil price fluctuations on the markets served by
our Global Energy segment; the impact of economic factors such as the
worldwide economy, capital flows, interest rates and foreign currency
risk, including reduced sales and earnings resulting from the weakening
of local currencies versus the U.S. dollar; our ability to attract and
retain high caliber management talent to lead our business; our ability
to execute key business initiatives; potential information technology
infrastructure failures; exposure to global economic, political and
legal risks related to our international operations including with
respect to our operations in Russia and Venezuela; the costs and effects
of complying with laws and regulations, including those relating to the
environment and to the manufacture, storage, distribution, sale and use
of our products; the occurrence of litigation or claims, including
related to the Deepwater Horizon oil spill; our ability to develop
competitive advantages through innovation; difficulty in procuring raw
materials or fluctuations in raw material costs; our substantial
indebtedness; our ability to acquire complementary businesses and to
effectively integrate such businesses; restraints on pricing flexibility
due to contractual obligations; pressure on operations from
consolidation of customers, vendors or competitors; public health
epidemics; potential losses arising from the impairment of goodwill or
other assets; potential loss of deferred tax assets; potential chemical
spill or release; potential class action lawsuits; the loss or
insolvency of a major customer or distributor; acts of war or terrorism;
natural or man-made disasters; water shortages; severe weather
conditions; and other uncertainties or risks reported from time to time
in our reports to the SEC. In light of these risks, uncertainties,
assumptions and factors, the forward-looking events discussed in this
communication may not occur. We caution that undue reliance should not
be placed on forward-looking statements, which speak only as of the date
made. Ecolab does not undertake, and expressly disclaims, any duty to
update any forward-looking statement whether as a result of new
information, future events or changes in expectations, except as
required by law.
(ECL-E)
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