Our innovation is best in the industry as well with a smaller one the more agile one the one that can truly answer immediate special needs for the biotech industry. I like a lot that position of the emerging leader that we’re shaping here. So, we came from a place where we were building now a place where we’re seeing some positive signs of growth. We will keep investing in capabilities in capacities because I firmly believe that this business is going to be a multibillion business down the road at margins that are going to be way north of our target of the 20%.
Operator: Our next question is from the line of David Begleiter with Deutsche Bank. Please proceed with your question.
David Begleiter: Thank you. Good afternoon. Christophe back on the growth investments in terms of the timing right now was there anything you’re seeing in the market vis-a-vis competitors opportunities that enhance your decision? And exactly where are the investments being focused by business and by geography where is the biggest portion of that going? Thank you.
Christophe Beck: Thank you, David. Maybe so to your first question. So, where as I’ve shared with many of you, so we look at our businesses in four key categories. The fuel the growth, the protect the growth, transform the growth, and fix. Those are the four big broad categories where we put our businesses and our markets and invest accordingly to make sure that we do a very smart capital allocation based on projected returns. So, they are the obvious candidates here. We talked about Life Science just before, we talked about Pest Elimination just before, we talked about Institutional just before and especially in Industrial, there are two new areas that are having outsized growth opportunities and those are data centers and semiconductors.
We have a good position in both stores and markets. As you know, those are two end markets that needs huge amount of energy/water and we help our customers ultimately to disconnect the growth related from AI from impact on natural resources, water and energy. And that’s exactly what we do for the high-tech companies. It’s to help them manage data centers that are, well, much more high-powered and much — many more data centers, but at the same time reducing to zero, the impact on the environment and the same on the semiconductor side. We’re also investing in digital technology, which I’m really proud of what the team has done over the past few years, and it keeps accelerating, because we have so much data, so much knowledge, so much capabilities ultimately to leverage the knowledge that Ecolab has in every industry in order to help every industry to reach the max potential in terms of performance, in terms of business results and in terms of environmental impact.
So that’s the way we think in terms of growth investments.
Operator: Our next question is from the line of Pavel Molchanov with Raymond James. Please proceed with your question.
Pavel Molchanov: Yes. Thanks for taking the question. PFAS has been up in the headlines in the U.S. And I guess, I would just ask you to comment generally on what the opportunity looks like for you in the U.S. as well as internationally?
Christophe Beck: You know Pavel, we’ve been on that topic for a very long time, but we don’t want to be part of the marketing fray or political fray of PFAS, we are by far, the leader in water globally. And we’ve been in the business of mastering water purity for a very long time, like almost 100 years, as you know. So PFAS purification is one of the many things that we do and can do in water. So we are working very closely with our customers, but mostly B2B, very limited interest to go to municipal government, residential. This is not where we are as a company. We remain on commercial. We remain on B2B. And we’re working with our customers to really understand what they need, where they want to go. The very good news is that we have the technology.
We have the science. We have the expertise to solve it. We want to do it in a way, which is safe for the company, safe for the customers and that it can make a lot of money as well as for investors going forward. So more to come, I like where we are, and we’ll see where we’re going on this one.
Operator: Our next question is from the line of Laurence Alexander with Jefferies. Please proceed with your question.
Laurence Alexander: Hi, guys. I have a question around sort of your growth investments and the targeted returns. I think, Ecolab usually has a metric for almost everything that we can think about. So do you have a sense for what your historical kind of hit rate is for those types of investments? Or — and I guess what I’m getting at is, as you move more into sort of the data marketing to customers, is the hit rate getting better or worse compared to your expectations for how kind of your investments in staff and training and marketing are playing out?
Christophe Beck: Well, the short answer is that the hit rate is getting much better, especially when we think in terms of digital technology, data AI, we are uniquely positioned, serving 1 million customers in the world in 40 different industries in 172 countries, and connecting, as you’ve heard, thousands of devices and operations around the world. Today, as we speak, we have capabilities that no one else has and data that no one else has as well at the same time. So we know that investing in digital technology is an almost 100% hit rate. When you think in terms of margins, well, there is no raw material into our digital technology. So our margins are way higher as well there. So it’s kind of a combination of large potential, unique capabilities that we have and certain high-margin investing behind digital and AI for us is a no-brainer.
And we’ve done it for 30 years, and we’ve accelerated the last five, six years quite remarkably. So this one, it’s kind of 100% hit rate. For all the other ones, because like I’ve said before, we make absolutely sure that our SG&A productivity, underlying productivity improves continuously. And it does and it’s important that it continues to do so. But in some moments like now, I want to accelerate our investments as mentioned. So in our frontline buyer power at the same time beyond the digital investments as well in our capabilities as well to support our front line so it’s going to drive our ratio of SG&A so slightly higher for a while. But when I think about the second half and 2025 I think it’s going to normalize pretty nicely and underlying productivity is going to remain strong.
Operator: Next question is from the line of Jeff Zekauskas with JPMorgan. Please proceed with your question.
Jeff Zekauskas: Thanks very much. I think the overall volume growth of the company was 2% and I think that what you said was that in the industrial business, if you excluded paper, volumes increased. So I take it that industrial volumes were down year-over-year. Is that right? And in the institutional business where volumes up I don’t know five or six.
Christophe Beck: I guess that’s the end of your question Jeff.
Jeff Zekauskas: That is the end of my question.
Christophe Beck: Very good. I will be too mature. I was not missing something obviously here. So a lot on volume. You’re right. So we’re still 2% for the company. That’s the way we report it. So that’s not a surprise. That’s why I’m saying the 1% to 2%. So for the year I feel really good in getting that again that every quarter is created the same. We have some year-on-year comparison we need to manage with. But the 1% to 2% feel good and I’m talking 2024 year. And individually here institutional, you’re right. It’s directionally it’s kind of half price, half volume, doing really well, as I’ve shared as well so previously as well in some of the question. And in Industrial, overall volumes were flat-ish for the first quarter all in and they were positive ex-paper.
I don’t want to correct too much Jeff as well. Within Industrial when I think about the various businesses I feel really good with where we are because if I go a little bit more under the hood. Well you have heavy water, light water are kind of in the low mid single total growth here not just volume. Downstream is high mid-single so in a very good place as well. And then we had mining, that’s a little bit negative because comparing against a crazy quarter in Q1 last year but underlying doing really well and then you have paper softness. So generally, industrial is moving in the right direction in a world where manufacturing demand is not exactly accelerating. So I like where we are and even more where we’re going out.
Operator: The next question is from the line of Steve Byrne with Bank of America. Please proceed with your question.
Steve Byrne: Yes. Thank you. Kind of a follow-up on the pest control business. Do you have an estimate of what fraction of your customers within industrial and institutional are customers within pest control? And what could that fraction get to is that the primary driver for that business? Or would you say, expanding the platform and getting into other products like fumigation and so forth is the growth driver?
Christophe Beck: Thank you, Steve. The pest business has grown over the last many years, almost entirely through what we call, Circle the Customer, Circle the Globe, which is penetration of customers that the company has even if pest elimination doesn’t have. As pest elimination grew over the last few years obviously, they got their new customers as well at the same time, which are feeding as well the opportunity for the other non-Pest Elimination businesses. But if I look at the opportunity of pest elimination within our customer base well it’s worth billions out there. So sky is the limit. That’s why this business is something that I like so much.
Operator: The next question is from the line of Kevin McCarthy with Vertical Research. Please proceed with your question.
Kevin McCarthy: Yes. Good morning and thank you. Perhaps a few housekeeping questions on your surgical divestiture, would you comment on the level of EBITDA attached to that business, I’m not sure what the tax basis might be, but perhaps you could also comment on the expected cash proceeds and the deployment of those proceeds when the deal closes in the back half of the year?
Christophe Beck: Okay. Thank you. I’m going to pass that question to Scott. But before I get there, so you’ve heard in my open basically how we look at it. So we’re not disclosing too much detailed business information. So underneath what we publish. That’s the case, obviously, for a business within health care. So the $15 million headwind per quarter once we close is a good direction but more to that, Scott.
Scott Kirkland: Yeah, Kevin I’ll talk on the proceeds and gain but very high level. At this point, I don’t want to get ahead of ourselves. We need to close the transaction first, which we feel very good in. And the proceeds themselves we’re going to remain committed to our capital allocation priorities, which is focused on investing in the business. And from a tax perspective gain, yeah, we do expect to realize a very attractive gain on the sale but we’ll disclose that amount once the deal closes and once the accounting is finalized. But and that gain will be in special charges just from a housekeeping perspective and that’s not included in the $0.15 estimate we had on the full year special charges.
Operator: Our next question is from the line of Patrick Cunningham with Citibank. Please proceed with your question.
Patrick Cunningham: Hi, good afternoon. Thanks for taking my question. So Europe has been a drag on growth for several quarters. Can you give us your latest thoughts on the region and maybe how volumes trended in the quarter? And institutional standout as particularly strong there, is that mostly market outperformance? Or is food traffic starting to improve?
Christophe Beck: So two questions in here. So on Europe, I like a lot what this business has done. It just takes a big picture, 10 years ago it’s a market where we used to make no money. And today it’s a business that’s close to the average of the company today. So has done a remarkable work, has grown very nicely last year is growing as well in the first quarter in a very difficult environment and margins have kept expanding very significantly in Europe as well at the same time. So overall Europe performing very well in a difficult environment. Now to your question on institutional and the food traffic, it’s mostly share gains within our customers and customers we don’t have. Food traffic is not up versus 2019 right now and especially the traffic in the dining room, so people sitting in a restaurant not just taking a drive-through or ordering digitally as well.
While this traffic is even further down obviously. So if I look at where we are in terms of growth, where we are in terms of margin in that business, well it makes the performance of that business even better in a market that hasn’t fully recovered yet because it’s all driven by market share.
Operator: Our next question is from the line of Andy Wittmann with Baird. Please proceed with your question.
