Q4 2020 Ecolab Inc Earnings Call
[music].
Greetings and welcome to the Ecolab fourth quarter 2020 earnings release Conference call.
At this time all participants are in a listen only mode.
A 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, this conference is being recorded.
And is now my pleasure to introduce your host Mike Monahan Senior Vice President external relations.
And you may begin.
Thank you Hello, everyone and welcome to Ecolab fourth quarter Conference call with me today are Christophe Beck, and Ecolab, CEO and Dan Schmechel our CFO.
A discussion of our results along with our earnings release and the slides referencing the quarter's results are available on ecolab, <unk> website, and ecolab Dot com slash investor.
And just take a moment to read the cautionary statements and 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 and our form 10-Q for the period ended September 28, 2020, pardon me and September 30, 'twenty and 'twenty and in our posted materials. We also refer you to the supplemental diluted earnings per share information and the release.
Starting with a brief overview fourth quarter earnings continued to show sequential improvement despite the negative impact of a greater than expected second COVID-19 wave.
And as earnings per share decline narrowed and once again.
As we leveraged our new business wins and increased customer penetration and digital technology, along with lower costs to show these sequentially better results.
As before roughly 80% of our aggregated business showed good sales and strong income growth.
Our institutional division, which is roughly 20% of our current sales.
We remain the most impacted reflecting the effects of COVID-19 driven restrictions on global restaurants and hotels.
But we also note that institutional is the business that could benefit the most over the coming years as long term hygiene standards continue to rise.
In 'twenty and 'twenty, we took a number of actions and make targeted investments for post COVID-19 success.
We believe we emerged from 2020 better positioned as our business win new product development digital platform and our improved field sales force effectiveness should lead to a more effective and profitable ecolab business.
Looking ahead, we expect global efforts to reduce COVID-19 spread and the expanded rollout of vaccines.
Lead to further global economic improvement in 'twenty and 'twenty, one we believe our strength and business will deliver full year 2021 earnings above 2019 results from continuing operations for.
For the first quarter year on year percentage decline showing modest sequential improvement from the fourth quarter and the remaining quarters of 2021, showing strong year on year growth.
And the world challenged by Covid, we saw the value of Ecolab is a premium product and service expertise was once again underscored through strong new business growth as well as our strengthened existing customer relationships, despite the difficult market conditions.
Our position as leader in food safety clean water and healthy environments and become even more important.
We believe that this position along with our long term growth opportunities remain robust.
Driven by our huge remaining market opportunity, our leading global market position.
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 a resilient free cash flow.
We believe the sustainable long term business drivers will continue to lead superior long term performance for ecolab and our investors.
And now here's Christophe Beck with his comments.
Thank you so much Mike and good afternoon, everyone.
It's a pleasure for me to lead my first quarterly conference call as CEO to share with you on our results and our expectations for the future.
It is no understatement to say that these are exciting times to lead this great company when what we do and most importantly, the way we do it matters more than ever.
Ecolab is an exceptional company built on solid foundation and strong values and Ed.
And it tends to be both a shaping where we ought to day and where are we going tomorrow. So do not expect any sharp turns and that will keep building on what made us strong resilience.
To build and successfully.
The challenges towards phase two day on <unk>.
So long term opportunities for ecolab and I believe that the best is still yet to come so I look forward for sharing with you on our progress and ambition and this and other forums.
I went to our results.
And with performance continued to improve in the fourth quarter.
For the short term reversal of global market trends and like what we and most actually sold coming out of the third quarter earnings call Covid.
Covid cases went up looked down and extended and restrictions could tighter and most places for instance, right out there with Q3 cold, Germany moved from 40% of restaurants being close to 100%.
And a third of the U S state heightened restrictions.
Nonetheless, our adjusted EPS continued to improve and narrow decline decreasing 15% and Q4 versus the minus 24 and Q3.
We could have easily delivered more in Q4, but we decided instead to keep decreasing our growth investments and innovation digital technology sales capabilities and backbone infrastructure and the quarter.
We are ready for the rebound and the opportunities post COVID-19.
Our consolidated sales trend held stable versus the third quarter, which is a good indication as well that our investment strategy is working and importantly, our cash flow remained strong and fourth quarter free cash flow improved versus the prior year.
Excluding the institution and division, 80% of our aggregated business grew sales 2%.
And operating income increased a strong 17%.
And that's again on life Sciences posted 22% topline growth and a very strong 65% operating income growth.
And our largest segments industrial delivered a robust 18% operating income growth with a modest sales decline of 3%.
So why do we keep improving the performance of all our businesses institutional we remain our primary near term focus and he too.
Progress is being made.
And when temporary closures and on premise traffic both got worse in the fourth quarter versus the third quarter and in the U S and institution sales trends remain unchanged and our margins continue to recover.
In 2020 as Covid hit I believe we responded really well to a unique situation and a global restaurant and hotel industry. That's historically been a highly consistent and predictable.
We protected our team and our business to make sure we were ready to capture the growth when the market reopens.
And we took great care of our key customers and enjoyed one of our strongest gears on both retention and new business wins.
We need to keep providing all of our customers with world class scientific expertise and comprehensive program.
The new no range range of premium Sanitizers and it's a program that kills the COVID-19 virus and 15 seconds, we believe faster than anything else in the world.
And we help our customers protect their business. When we are sharing day guests with Ecolab science and 55 and new program that has quickly established itself as a leading certification program and the U S.
We've also accelerated the work started a few years ago to continuously augment our critical field sales and service capabilities.
We used 2020 to accelerate the implementation of our latest digital field technology and.
And we expect this technology to further improve our field service and effectiveness customer experience and operational performance.
Same time, we finalized the fine tuning of our field sales organization started 18 months ago. So pre COVID-19 and we expect it to further increase day firepower and drive units and penetration share gains as we've mentioned over the past few calls with all of this I believe and institutional is well positioned to benefit from them.
Markets reopening and from the right of global hygiene standards.
Now more broadly we enter 'twenty one in a position of real strength, while we expect COVID-19 will continue to have a significant effect on the economy and on.
And market, especially in the early part of the year, we expect to see the beginning of the COVID-19 recovery for our global market to start and the second quarter.
If we then take a few quarters to fully realized and new normal.
We believe that our strong new business wins and product and service innovation investments and new hygiene and digital technologies and successful sales and profit initiative, we deliver for year 2021 earnings above 2019 results from continuing operations.
We expect the first quarter to show a modest improvement in year on year percentage decline versus the fourth quarter, while the remaining quarters of 2021, we show very strong year on year.
In other words 2021 should be a strong rebound for ecolab.
With hygiene standards that are rising fast we're ready to respond to these new trends with breakthrough solutions and a brand that inspires trust.
With water and climate challenges that have just gotten tougher we uniquely positioned to help our customers reach the sustainability ambition at a high financial return.
And he's an unbeatable global team supported by state of digital technology, we look into the future with a great deal of confidence.
And I look forward to your questions.
Mike It's always back to you.
Christophe that concludes our formal remarks, operator would you. Please begin the question and answer period.
Thank you we will now be conducting a question and answer session.
And we ask you please limit yourself to one question and one brief follow up question for color and others will have a chance to participate.
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Thank you and our first question be coming from the line of Tim Mulrooney William Blair. Please proceed with your questions.
Good afternoon Christophe.
Good afternoon and Tim.
I really only have one question one thing I want to talk about.
Is this you mentioned improvements and your field services organization.
Implemented over the last 18 months I think that's part of your institutional Advancement program and I'm not asking you to give away any competitive secrets here, but can you talk about what those improvements were specifically I think you mentioned improving sales firepower, which should drive gross new unit sales and market share gains. Thank you.
We'd love to thank you Tim Great question. So as you mentioned and I've mentioned and my insurer as well those are developments.
Debt, we have started a few years ago, and we've made those developments and as well by working together with our team and our technology partners as well, we've tested debt as well and numerous occasion and really making sure that everything is working really well because it's so important and so for our team and we're really.
Aiming at two objectives that we've accelerated.
During the past few quarters, because we had a unique opportunity during COVID-19 to get it done faster and we could train our people as well during times that the head as well available and the two things firstly, it's really too.
The service delivery.
Does that mean for our teams is ultimately debt.
Digital tools are helping them get their daily program, that's being optimized by the system, if they get the and emergency call as well as upcoming Wednesday, and the daily program, while it's rerouting and making sure. They can do that with the minimum time and the minimum.
Mileage as well too.
Get there they get all the customer information in real time, when they go and visit as well as the customer they get tours as well to sell better any new solution and they have training tools is whether they can share with the customers in order to make sure that those programs are being used for really the best way. So the first objective is really about improving the customer experience.
And it is improving the work performance of our teams and ultimately for them, having more time for that to spend with the customer and the second objective and I conclude on that is really on the sales side.
Our team each to help them sell more.
We've shared many times, our ambition to increase penetration.
While those systems are helping do that because they give you a real time customer information and our teams know how to estimate performing the products. They are using the new products that we could be adding as well to them and they can merchandise with the results that have been accomplished at the end of the day.
And it's easier if I were keen it's better for the customer and it goes flat as a whole as well for the company.
Thank you.
And next question's from the line of Manav Patnaik with Barclays. Please proceed with your question.
Thank you.
I had a question on <unk>.
And on.
On date that MGIC to have life science.
Have a nice growth there for you guys I think at your last Investor Day, you talked about several new ones and I was just wondering if you could give us some color there and if anything else has popped up.
During the past year and clearly.
And thank you manav.
And while expanding our Tam has always been so part of the ecolab strategy for finding new growth avenues, new growth markets and lining up resources behind them as being part of the way. The company has been growing you mentioning life Science. We started this business a few years ago, it's turned into an excel.
<unk> performance, it's been obviously helped by Covid as well at the same time, because the need of our former customer and so it has grown so much its driven as well great innovation as well so for that and in order to make sure. They could produce vaccines for instance in the safest and most profitable way at the same time, but the inter.
And the enough.
That way of approaching things Manav has helped us as well opening new market like data centers.
And we've started that two years ago, when we sold debt companies, where ultimately outsourcing all day.
To larger companies.
Amazon, Microsoft Google and so on and we were dealing with them providing them with them solutions, because those computer and generate a lot of energy and need to be cooled down while we were providing solutions for them as many other customers and ultimately we've said Wow, that's a critical market for the future is going to keep growing.
We're going to create the division.
Well behind it which is exactly what we did that was before Covid then COVID-19 happened everyone use the cloud and it's a market that's been booming.
And as well it seems that there's been.
A good play and the last one and I'll mention on <unk> is animal health.
We knew as well debt.
Antibiotics.
And is something that consumers debt.
And I don't want to have.
Food ultimately so how do we have any.
Staying healthy and the.
Food chain at the very beginning and that's how we've created is where the division we've made the big acquisitions as well early last year, we see lines, which is creating that critical mass for that new market opportunity and which is leading to double digit gross it seems we've done that as well. So just a few examples like that.
Got it that's helpful and I was hoping you could just help us with the cave and itself in a cost and maybe margins for their first part of the EBITDA at least.
And with respect to the the rising.
Cost of raw.
And all materials. Please.
And Manav just to make sure that I understand that while you mean 21 Euro 2020.
21, and just do it.
Recent increase and all of the relative and how should we think about and how thats military and others.
Yes, so margin has.
And improving so over time in a row.
Businesses. So for a very long time debt was the case as well in 2020 since the low.
In Q2.
Obviously, we see that continuing in the quarters to come in 'twenty, one keeping really mind that we see the year 'twenty, one and two ports there will be the first quarter, which will be very similar to what we've experienced in Q4, and then there will be some of the reopening of the end markets and Q2, and then the peer ramp up in Q3.
And Q4, so it's kind of slightly better in Q2 and as of in Q1, sorry and as of Q2.
Rebounds, as well there we have good pricing power, which is good we have raw materials that are expected to be benign right now, but the indications that we see in the last few days last week.
And similarly saw going up in terms of raw materials, and so we'll have to mitigate that but this is something that we've been doing very well for many many situations similar debt, we've experienced and the bulk for us.
Thank you.
Our next question is from the line of John Roberts with UBS. Please proceed with your question, Thanks, and congrats on ranking near the top of the Barents sustainability list last weekend.
Thank you John.
A few vacation locations have actually seen pretty solid hotel occupancy and restaurant traffic not not a lot, but some have and do you.
You have any data to show and those specific areas that the overall cleaning product revenue per room for revenue per diner has structurally increased since the pre pandemic levels.
Yes, I don't have.
Did numbers to share with you, but it's very clear that these are places where it's reopened the one you mentioned for instance.
And we've had those guesstimate itself.
Mobile solutions in order to prevent the risk of infection that leads to better sales than what we had before but to your point as well. So those are in DVD on areas like vacation.
Groups that you described unfortunately, so those also just.
And selective ones.
Those are good indications that the moment that the overall market is going to reopen and as said hopefully that's the way we expected during the second quarter at retail and pounds of business on our growth opportunities and those unit that we either used to have or didn't have yet, but we'll have more solutions as well for them.
Thank you.
Thank you.
Our next question is coming from the line of David Begleiter with Deutsche Bank. Please proceed with your question.
Thank you Christophe industrial had a very strong quarter and full year silicon on industrial and 2021.
And that second and expand margins and how much of a headwind will be for stretch right discretionary costs.
And they come back and into the numbers for 2021.
Yeah.
Yes, so industrial will keep developing its margins it's been.
The indicators as you've noted in 2020.
And in 'twenty, one, we expecting as well so pricing to remain kind of at the similar levels than what we see in the raw materials.
Going to be probably a bigger headwind.
And then what we had in 2020, so net net margins will be similar but operating income we keep growing.
Very good and then just on the cash flow and any thoughts or comments on working capital and Capex in 'twenty one.
Daniel went on to this one.
Thank you.
Well maybe to ground us in the very strong performance that we had in 2021st of all working capital was a net contributor to strong cash flow because although we saw a little deterioration and collections and an increase in inventory on hand from a days perspective.
And at the very favorable for cash flow at least impact of declining volumes made working capital and net contributor. So 2021 will be somewhat the opposite of that meaning as the business continues to rebound, we will invest more and receivables and an inventory so not significantly, but we will invest and working.
Cat four and 2021, having said that.
We will remain very focused on collections and I've said before in earlier calls we are very determined and have been sure to be paid for the value that we're creating for customers and frankly on the inventory side, just the personal comment on loss.
My expectation and I know Christophe shares for this.
Sort of Vibrantly and.
Is that our goal on inventory and 2021 is to make sure that we're building the right stuff for the right customers and expectation of the rebound and so the favorable inventory and 'twenty will reverse in 2021, but it won't be a big drag on overall cash flow performance.
Thank you.
Our next question is coming from the line of Gary Bisbee with Bank of America.
And with your question.
Hey, guys good afternoon.
Afternoon, I guess, the first question just going back to the institutional initiatives here.
Can you provide a little more detail because what I'm really trying to get out is how much of it is about right sizing costs.
Versus other changes that would promote growth certainly that for you.
Prepared remarks talk about spend to deliver this and.
And cost savings after the fact, so part of it clearly is cost driven but what you've discussed earlier was much more I think on the.
On the growth positioning for growth and have it just a little more color. Thank you.
Yes, Thank you Gary.
And it's it's not cost driven.
And what we're doing and institutional is part of what we've been doing for for years. It's it's.
Driven by two things as I mentioned earlier.
First one is really software to increase our sage by a power we always want to have more dedicated people so towards spending nuc estimates, sending new solutions to existing customers we've shed.
As well our ambitions are to increase penetration by 20%.
As well over time, while we need to increase as well of a sales by a power which means people on ours.
And behind that in order to do delivery technology is obviously, helping as well so for that on the other side on the service.
And it's to improve the customer experience that when.
One of our service Rep is going to one of the guesstimate, what she or he doesn't spend a lot of time collecting data we're getting papers together.
And he can really get in and has all the information and really work immediately with the customer or the customer issues that they might have as well and as mentioned before is on their day. He's organized battery. If we can really route them in a way that minimized hours and knowledge at the end of the day they can service more customers spur.
<unk>, Mull time, which the customer instead of internal administrative staff with fixing equipment that you have and if that works well. It's good for the customers and it's good for us debt in other words, we have more sales firepower, we have improved operational efficiency and service, which net to an improvement.
And of cost structures, while at the same time.
Okay. That's helpful and then the follow up can.
Can you help us thinking there Derek.
Hi.
Sort of thinking through volume as you've earned in areas that have benefited from the pandemic, so whether that sanitizers and disinfectants or other.
How those could persist versus maybe moderate at some point in the future and I guess as part of it are you signing new long term contracts.
And for these things with the volume expectation or.
Or is there the risks and a lot of the incremental revenue could go away at some point and the future wins, when the pandemic and the rear view mirror.
Yes long term, we always have contracts with the volume if not all of our customers around the world. That's part of our business model and and it will remain as such as we're going forward and we have plans abuse visa to increase as well as the demand is.
All of them, that's why we invest as well so behind all of those customers so to Mike's point before and things so 80% of our aggregate the business has been growing in 2020, while those businesses will keep growing.
As well.
In 2021, when you think about it is 80% had been growing so a 5% decline in 2020 and 14th to stand operating income, while they're going to keep growing as well.
And in 'twenty, one day mix is going to be a little bit different.
As mentioned saw in life science demand was higher for natural reasons in healthcare and we got those national government and <unk> as well, but underneath you can have these five 6% growth, which is good industrial is going to move towards positive growth as well and sanitizing product, they're going to stay.
At a fairly high rate of growth. So it's not going to be the same as in 2020, because I don't expect people to monetize their hands. The same way as they did during COVID-19 debt would be two nice, but its going to be more than what they did before COVID-19 speaking on in 2019. So overall I think that the trends.
All gonna be saw similar or better for most of those products.
Thank you.
Our next question comes from the line of Rosemary Rosemarie <unk> with G. Research. Please proceed with your question.
Good afternoon everybody.
Good afternoon.
So just going back to the.
The demand for high demand in life science, and and health care.
You have the hearings that there may be some inventory builds and some of the channels and actually you could see a decline in revenues for full year, 'twenty and 'twenty 'twenty one.
I don't think so Rosemarie, so life sciences kind of a day.
Direct business. So there is no in between distribution.
And it's multi bulk products as well that you can't release door.
So inventory is quite much they'll just in time and life science and it's been growing strong in 2020, it's been growing strong before that.
And we're planning for Greg gross as well in 'twenty, one and Salt life science is going to be the continuation of a great story.
But we need to keep in mind, as well that well dead and exceptional Europe in 2020. So the <unk> reason that we will make in 'twenty, one will look a little bit softer and thats why it is going to be important to look at the underlying gross which is the way we run the business anyway, and it's even more true.
And for health care.
The gross of 20% plus debt that you had and the last quarter was partly driven as well by gross National DS.
And that we've made so for some of the governments in order to fight Covid underlining its' going to be five 6%. That's the way we measure right. So when you do the comparison Rosemarie 21 versus 2000, and it will look like a much lower gross but it's just because the comparison.
And as kind of unfair, but we will look at the underlying gross which is ultimately what's going to be long term and we expect it to be within the range of five 6% for healthcare.
Okay. Thanks, that's it.
Helpful and then just on.
If we look at 2021.
Like that.
Results will approach those of 2019. So do you expect these to visa case for all segments and both for revenues and operating income.
So the 80%.
Debt that we've talked about with.
<unk> healthcare life science industrial while Theyre going to be ahead of 19, because they've been ahead in 'twenty versus <unk> 19, and theyre going to be ahead of 'twenty and 'twenty 'twenty one.
And we're going to keep improving our business, whereas institutional is the one that needs to grow from a much lower level started in Q2.
2020.
And you've seen in Q3 and improvement Q4 net.
<unk> Q1 is going to be the same and Q2 is going to continue afterwards, but at the same time we.
You need to keep in mind as well that we have in.
Investments in the business that we're going to make in 'twenty. One as we did in 2020 and I'm going to keep increasing those investments as well.
The mix is going to be unfavorable so in 'twenty, one versus <unk> 19, just because institution, who is going to be lower because it's going to be recovering towards the end up for Europe and the last point is that.
We have some some cost rebids people are going to start traveling and entertaining again will have merit as well so coming in there. So it's gonna be a different story in most businesses, but ultimately we feel confident that 'twenty, one and deliver earnings adjusted and of 19.
Our next question is coming from the line of Christopher Parkinson with Credit Suisse. Please proceed with your question.
Great. Thank you and despite a fairly choppy for Q, <unk>, which I'd say is okay.
Overwhelmingly expected.
We're starting to life, which you highlighted across your supplemental.
And when speaking to your teams can you speak to maybe two or three end markets for which you are now and what the incrementally more confidence on.
And were constructed and just given pent up demand once the world's truly open back up.
If you could hit on that and just any potential comments on preliminary share gains would be greatly appreciated. Thank you.
So just to make sure Chris that I understood. The question right. So the the end markets that we would estimate would be a rebounding. So during 2021.
Yes, and then your comments around market share. Thank you very much. Okay. So the biggest one is obviously, so institutional for restaurants and hotels and the way we measure performance and this down market today is how many units do we have compared to the low point.
In Q2, and how many solutions do we sell to existing units.
<unk> is really so to make sure that we improve our base the moment it reopens debt, we can accelerate and in institutional we have more units much more than we had in the second quarter last year, we have much more solutions as well so the moment the demand is coming back that's going to compound.
Which is really good news and we expect that not to happen and the first quarter, but it's going to happen sometime in the second quarter. Another one is downstream.
And is related to oil and gas demand.
And then cause are going to be used more when planes are going to be flying more wind boats are going to be more traveling as well like cruise ships, obviously for the demand for oil and gas. He is going to accelerate so our objective here is the same as what we did and institutional more refineries and most solutions to those.
Refineries and Thats look so.
And quite good.
And we speak right now so those are those are two big ones that are expecting to rebound in the second quarter all the other businesses major businesses.
<unk> are ultimately on a good path no matter what.
Thank you. Thank you. Your next question is from the line of Vincent Andrews with Morgan Stanley for sure Heiko.
Thank you and good afternoon, everyone. I wanted just to follow up on the new business wins, maybe in particular and institutional but you could touch on the other segments as well. So I guess, what I'm wondering is that there was a clear opportunity as COVID-19 hit.
To go get new business and I'm, just wondering if there's sort of a second phase of of new business opportunities and.
And that'll be unique to COVID-19, but it will come more.
During the reopening as maybe customers make a inc.
And we have a realization that they want to change providers or trade up or what have you. How do you see that playing out.
That's a great question, starting first with the.
The net new business and in 2020.
<unk> bin.
Quite ahead of 2019, which honestly personally I didn't expect that we would be that good but we'd manage so in 2020 to sell more new business than we sold in 2019 and to your point and institutional that's been the best New business generation.
And that we've had across the company. So institutional has done an exceptional job in terms of new business for.
For two reasons, mainly one is obviously for the focus of our team on new business.
During that time, but the second is the one that you touch just before that during those difficult times of Covid.
Customers were looking for expertise for scientific expertise. They didn't know what COVID-19 was to begin with how to address that issue how to get ready for the reopening how to get ready for the future as well and we all do unique and beneath that could provide that.
And that supports that to them in the U S like anywhere as well around the world for many came to us as well so during that time and the last point I mentioned and also our capability to supply.
Well, so, especially and sanitizing products gross has been outstripping.
On the supply so quite a bit we've built a lot of capacity as well during that time. While this is capacity that customers have been asking and debt, we've been able and as well.
And to sell to them so good new business and most in old businesses actually for the whole company on it, especially in institutional and I think that that's going to be even more true into and you want because we've demonstrated to our customers that we're here for them when they truly need us.
And Dan if I could ask you a quick question on the balance sheet, just seeing that the post retirement health care pension benefits.
And was up looks like a $140 million.
Dollars year over year that a function of discount rate assumptions on return on plan assets or what happened there.
Really the year on year changes discount rate driven okay. Likewise to this other income line that you see down below operating income so.
And as such a big impact both on the liability and on the.
Accrued expense.
Thank you and your next question is from the line of John Mcnulty with BMO capital markets. This year for your question yes.
Yes, Thanks for taking my question so the push on the ESG front, especially from industrial customers and players out there.
It seems bigger than I think.
This would have thought a few years ago, and I guess with that in mind. When you think about the the water platform that you have and especially on the industrial side can you speak to the level of engagements that you're having and is it higher than what you would have would have thought and say a couple of years ago. When you. When you guys gave the longer term outlook for the <unk>.
A 6% to 8% like I guess have we reached a tipping point, where we may see multiple years, where that business accelerates at a level that is maybe faster than what we've seen or what you may have expected how should we be thinking about that.
Its definitely bigger than what we sold and honestly I saw during COVID-19.
It would really take a back seat and none of that happened.
Thankfully actually so for the whole for the world and general and specialty so for our business as well.
We've had always more customers are coming to us for two reasons interestingly enough on one hand, saying well can you can you help us get towards our ambition in terms of ESG in terms of water usage and tens of climate, So cotwo emissions waste that we generate.
And as well and they're working and second dimension, which is an interesting new one for us many customers coming to us and saying well you guys as a company have done so well from an ESG perspective is this something we can learn from you that we could implement as well so within our own company and it can give you so.
Two examples and year on one hand and.
And lots of consumer good company.
Out of Europe, with whom we've been working for a few years towards the end of last serious debt. We need you to help us build a plan to become water positive by 2030, while those on new questions, which we know how to answer that no one else can and on the other hand, so you've seen and Microsoft.
And as well announcing their ambition to be water positive by 2030, we've done that plants that together with them, we are helping them getting there as well. So those are examples that up.
And two of many of those companies are coming to us. So yes, there is an inflection point.
That's tuning dig or better than what I would have sales.
Got it thanks very much for the color.
The next question is from the line of Justin Hauke with Robert W. Baird. Please proceed with your questions.
Hi, Thank you.
I just wanted to ask some questions on on the restructuring program and.
Just because it's changed a couple of times and it's somewhat difficult to track where you are.
Relative to the $355 million and total spend that youre talking about now through 2023, what's that expense under those programs as of the end of 2020, and then similarly, the benefits the $365 million of annual savings that Youre looking for in 2020 for.
What's the current run rate that's in the 2020 base. Just so we can kind of think about how that builds.
I think I'll, let you Don maybe start the.
Sure and I'll be able to if anything.
And of course so.
Just to make sure that we're talking the same numbers here and I think that we've disclosed and.
Actual costs associated with the $365 million and anticipated savings.
$335 million of which at the end of 2020 $275 million has been for crude okay.
So a very good start across all of these programs and from a run rate perspective as of the end of 'twenty and 'twenty. We've recognized about 200 million of total savings so.
Expect significant pick up in 2021 is for Mike, that's a minute and what kind of more or less stabilized or bleed out over 2022 for 2024.
Thanks, that's helpful and then Mark.
And my second one was just to make sure that we're all level set when you talk about.
91, adjusted earnings being in excess of the comparable 2019 level.
Can you disclose the pro forma number that excludes champion and that was $5 2000, and so is that the number that we should baseline your comments on.
The number that we would steer you toward is the continuing ops number which is $5 12 in 2019.
Thank you.
The next question comes from the line of <unk> <unk> with Citigroup. Please proceed with your question.
Yes, hi, good afternoon, and Christophe and welcome.
Thank you for Jay.
Yes.
And your institutional advancement program.
Whether youre investing and field reps and digital technology.
Is that all for gaining share how are your customers are demanding this and and how do you charge for it and it also market share gains.
And also lastly, there where do you think is your competition and regards to this thank you.
Great question. Thank you P. J, obviously felt when we think about share this is self serving.
This is not the way we think about it it's much more what's right for the customer and if there's one thing that we've learned doing COVID-19, especially and institution of is that customers need comprehensive solution. When you think about and infection risk while it's not just about sanitizing you Hans is making sure that the tail.
Abel.
Being sanitized the floors the drains.
The water that the food is safe that you don't have any path.
And there it's really infection is related to the weakest points that you would have in debt Q&A and seen from the customer side. These basically who is the partner that can help me protect everything I have on in my unit and the only one that can do that today at least is ecolab.
And as such so that's the way the customer is looking at us so he's really making sure that we offer programs that answer that and the Ecolab science certified as well is ultimately bringing it altogether. If a unit has all of the programs is as safe as it can be once they get the seed and we promote that as well so it's good for them.
Customer, it's higher demand for us it's good for us as well at the same time, so the whole organizational development that we're making is ultimately helping to address that guest and many.
Thank you.
The next question is from the line of Mike Harrison with Seaport Global Securities. Please proceed with your questions.
Hi, good afternoon.
Good afternoon, my ask about <unk>.
About your competitor diversity and they recently entered into a partnership with a water treatment provider.
And to really go after that food and beverage market a little more aggressively.
Do you think that could lead to some changes and the competitive dynamics that you're seeing and food and beverage and <unk>.
Water.
Going forward.
Well two things here Mike.
First we know that water and hygiene together is a winning proposition we've demonstrated that so for for years, but we know that partnership do not work. It's the second time debt.
They are trying debt by the way the first time, whereas we've not for many years ago and it didn't work.
So it's hard enough within the account they need to get older businesses working together towards one customer need doing debt to these partnerships is is really hard at this is interest.
Interesting to see there.
Theoretically it's a good idea in practice.
And I wish them luck.
Alright, Thanks, and then on the downstream portion of the business, obviously, that's under some pressure because of driving activity.
I wanted to ask the trend and refineries is towards the larger and more complex integrated refinery and they'd have petrochemical production as well can you talk about the relative opportunity for ecolab and one of these larger more complex refineries versus say a handful of <unk>.
It's complex refineries that have equal capacity.
The petrochemical sites on Definitly this sweet spot of our business and downstream, that's where we sell most of the solutions that were the.
Most demand from customers, that's where the margins are the highest and where the outcome is the best as well and many of those companies to the ESG point that was made before as well are interested in driving as well a better outcome from an impact on the environment as well at the same time. So this is the sweet spot. This is.
Our primary focus as well going forwards, we trying to get the Organisers wood behind petrochemical in a very dedicated way, but thats a little bit.
More for the for the future as such whereas the traditional and all the type of refineries are lesser for priority for us So you're exactly right and Thats what were going after and that's the way we get them organized to really capture that growth and.
And the margin and I'll just conclude on one point is basically that petrochemical in 'twenty and 'twenty has been growing as well and a difficult environment, So which is approved.
That approach working so really well.
Thank you for.
The next question is from the line of Adam tearing and with Stifel. Please proceed with your question.
Hi, it's Adam on for Shlomo Rosenbaum I was curious if you could talk a little bit about what contributed to the margin level and the health care business this quarter and kind of what the interplay between delivered product cost and mix et cetera.
So healthcare, Inc, 2020, and general size had very nice margin development.
And as well as the comparison versus 2019.
So a nice improvement he feels better and Q3 versus Q4, because the volume was higher because those one time deal with governments, we're still impacting the business.
And then you heavily so you've got much more leverage.
And as such but that being said.
The drive of a for.
Program selling in healthcare the focus on infection prevention and the digital technology the pricing their work on margin improvement while has contributed to the margin improvement in 2020, and he's going to stick of and improvement as well and.
And in 'twenty, one so I feel good about the margin development and healthcare when I think 'twenty, one and beyond.
Okay and.
And in terms of the earnings for 2021 versus 2019, and I've already touched on that earlier.
Question on.
Can you give me more detail on what needs to happen there and how much of that improvement. It expect improvement will be explicitly for Mike on cost savings.
So in order to get there, which we feel.
We're very confident.
Deliveries saw and EPS in 'twenty, one and that sort of add up to $5 and 12 in 2019 and.
Mentioned is basically driven by by body for years.
And to four things. The first one is 80% of our business, So industrial healthcare and life science growing growing operating income in 2020 is going to keep doing that obviously saw in 'twenty. One so those loans need to keep moving and they will they have good momentum they have good new business and they have.
Physicians that customers are asking for which is really good same time, you need to have institutional that turns the corner as mentioned is not going to be in Q1, it's going to be very similar than what we had in Q4, but it's going to be some time in Q2, that's going to catch up as well. So Q2 Q3 Q for one institution is good getting.
Back towards where it used to be so as wed so pre COVID-19, so that's going to drive as well.
Would that outcome and the third point is as you mentioned so we have cost savings initiatives that Dan has been presented as well that are helping but it's important to keep in mind debt would be keep investing and the business people are going to stop traveling as well more we didn't give them merit.
As well as we do every year.
As well as such so when you bring it altogether, 80% of the business needs to keep humming and it is and it will institutional and needs to recover as of Q2 and the quarters to come and we need to make sure that both on the cost savings and investment we balance that and a smart way and we will get to the right place in 2021.
Thank you.
At this time reached the end of our question and answer session and I will hand, the floor back to Mr. Mike Monahan for closing comments.
Thank you that wraps up our fourth quarter Conference call. This conference call and the associated discussion and slides will be available for replay on our website.
Thank you for your time and participation today and our best wishes for the rest of the day.
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect. Your lines at this time and have a wonderful day.