Ecolab Inc. (NYSE:ECL) Q2 2023 Earnings Call Transcript

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Scott Kirkland: Yes. Hi Ashish, thanks for the question. Yes, as you said, gross margins improved nicely. It was up modestly in Q1, 20 basis points, but really saw great expansion year-over-year in Q2, up 130 basis points. As Christophe said, continue to drive new pricing as well as maintaining the pricing that we’d already achieved and had hit that peak in pricing in Q1, but continue to drive new pricing and then seeing that DPC inflation easing a bit. So, as you said with that, is that easing inflation on DPC as well as the new pricing is what is going to help drive continued margin expansions in that 150 to 200 basis points year-over-year. So, we expect DPC to continue to be up year-on-year, just at a smaller rate as we see in the second half of the year. So, as we said, up 9% in Q1, 5% in Q2 and probably low-single-digits in the second half.

Operator: The next question is from the line of Seth Weber with Wells Fargo.

Seth Weber: I wanted to go back to the strength in the institutional margin for a minute. Just, have you — can you provide us kind of where you’re at on the cost-saving program? I’m just trying to gauge how much of the margin expansion is a function of price versus volume versus the actual — the cost initiatives that you guys have kind of started to talk to, but not clear where you’re at in that process? Thanks.

Christophe Beck: I’ll pass that question as well to Scott, but before I do so, the two main drivers, institutional of volume/new business and the pricing that they’ve done really well, also fed by new business and the restructuring that we announced as well earlier, so is going quite well. But I’d like to have Scott provide some more details on that?

Scott Kirkland: Yes, happy to do that. Yes, as Christophe said, institutional margins are doing very well. It’s really a combination of everything. As we talked about earlier this year as part of the expanded program, that expanded program had a total run rate savings of about $195 million. And we expect to realize the vast majority of that, let’s call it, 80-plus percent of it by the end of this year. We’re progressing on track for that, about that pace through the end of Q2, and that represents for the full program as well as the institutional, the I&S business.

Operator: [Operator Instructions] The next question comes from the line of John Roberts with Credit Suisse.

John Roberts: Thank you. Nice quarter. Can you give us a rough split of the Healthcare business between Surgical and Infection in North America? And why is Surgical so much smaller in Europe?

Christophe Beck: So in North America, it’s roughly saw half-half. And in Europe, it’s mostly Infection Prevention, which is the reason why the bifurcation that I’ve talked about is happening in North America, because in Europe, it’s a different business, almost focused on infection prevention today already.

Operator: Our next question comes from the line of Josh Spector with UBS.

Josh Spector: Just Christophe, I’m intrigued by your comments around volume about them continuing to improve. I think a lot of companies have been a little bit cautious about some of the trends in Europe. And I mean, it’s still a relatively sizable market for you. So, what are the drivers that you see that gives you that confidence about volumes improving? And when you talk about that, is that up year-on-year, or is that sequential?

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