Q2 2021 Ecolab Inc Earnings Call
And then.
Great.
[music].
Greetings and welcome to the Ecolab second quarter 2021 earnings release.
Prince call at this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
And if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as.
As a reminder, this conference is being recorded it is now my pleasure to introduce.
Your hosts Mr. Mike Monahan Senior Vice President external relations. Thank you Sir you may begin.
Thank you Hello, everyone and welcome to Ecolab second quarter Conference call with me today are Christophe Beck, Ecolab, CEO and Dan Schmechel our CFO.
And of our results along with our earnings release and the slides referencing.
To your quarter's results are available on <unk> website at Ecolab Dot Com slash investor.
Please 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.
Thing that cause actual results to differ are described under the risk factors section and our most recent form 10-K, and and our posted materials. We also refer you to the supplemental diluted earnings per share information on the release.
Starting with a few brief overview strong second quarter results reflected significant year on year sales and.
Is that could growth driven by recovering markets accelerating pricing and new business wins, which more than offset increased delivered product costs and the slower pace of re openings outside the U S.
We have implemented aggressive pricing actions to offset increased over product costs, leveraging the strong product and service value we deliver to customers.
And when combined with our strong new business wins, we expect to once again successfully manage the current inflation challenges and uneven global economic recovery to deliver a very strong sales and earnings growth in 2021.
And our position as leader in food safety clean water and healthy environments has become even more important and the last.
And earnings per months.
We believe this position along with our strong 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 through that our ability to.
18 meet their growing ESG ambitions.
We believe that these sustainable long term business drivers will continue to yield superior long term performance for ecolab, and our investors and now here's Christophe Beck with his comments.
Thank you so much Mike and thanks to all of us for joining us today.
That affected Q2 was indeed, a very strong quarter for our company acquisition adjusted sales rose, 12% driven by the U S and China with the reopening of Europe and the rest of the world are expected to follow progressively adjusted earnings per share ended up as strong 88% over last year.
U S institutional.
As I can say it has more than doubled in the second quarter versus the same quarter in 2020, clearly outperforming the industry.
The number of restaurants, we serve as well as the number of solutions. They buy from US ended up almost back to 2019 levels and are growing fast growth of strong signs of how much business. We gained during the pandemic.
And the growth potential we have as markets reopen.
And industrial accelerated to 3% and Q2, driven by strong business strong new business generated during the pandemic and accelerated pricing what does sales were up 7% with slight industry is up 12% driven by strong momentum in new segments like data centers.
<unk> grew 53% in the quarter.
<unk> was up 10% driven by strong demand for our innovative solutions and board and packaging, while food and beverage kept improving downstream remains a bit challenged in the quarter. The repositions itself from a focus on operational efficiency towards new promising sustainability.
Which brings.
Health care and life Sciences also had very strong and consistent underlying sales growth and Q2 with mid single and double digit growth respectively.
<unk> sales were only down as they are respectively compared to exceptional growth of 13% and 53% in 2020 largely driven.
And of unusual high demand and 1 time is during the pandemic.
And finally, the other segments grew 23% driven by continued strength of pest elimination, which was up 21% in the quarter benefiting from further market reopening and very strong and your business.
On the margin front things progressed very well too.
Overall margins, improving 420 basis points.
Beyond the U S institutional recovery, our continued progress benefited from accelerated investments made and digital technology during the pandemic as well as overall pricing that's accelerated to 2% in the second quarter.
With this backdrop and for the full year.
And we remain confident of our ability to deliver adjusted earnings that are better than 2019, excluding that Texas race, how much better is the only question considering the delta variant the timing of the opening and Europe and in the rest of the world as well as the speed and amplitude of the rise of inflation.
More broadly our.
Income outlook has never been stronger our new business and innovation pipelines are at record levels, our new growth engines like life Sciences healthcare high Tech and data centers are all very well positioned to drive incremental growth and our digital capabilities continued to increase customer value field productivity.
Along with customer experience.
Our main focus right now and will be to leverage these positive pricing environment to protect and strengthen our margins and do so while further enhancing value for our customers.
This is something we've accomplished many times in the past and expect to successfully accomplish once again.
And therefore, we've now embarked on a third round of price increases, which will progressively covered the new rapid rise of input costs that we've seen in Q2 with the biggest impact to be seen in Q4, when we expect pricing to reach 4%.
Overall, we feel good about our ability to deliver the second half of 'twenty 1.
Even if the pacing between the next 2 quarters will be slightly different than initially anticipated. We now expect attractive sequential improvement and the third quarter and and most significant wanting to fourth as pricing actions will hit the P&L.
And finally global trends and people health like infection prevention and food safety.
As well, our planet health like water and carbon emissions, becoming front and center for every business leader.
And there is no 1 positioned to help customers on both fronts better than ecolab, while helping them and show a strong and long term business sales in other words, we are strengthening our global position as deep natural sustainability partner for our cash.
All this combined with a strengthened highly innovative portfolio and strong business momentum terrific, new wins ex Ecu pricing and unique digital capabilities to position us with great momentum for 'twenty, 2 and will contribute to drive continued strong digital and double digit earnings growth for the years to.
Come with that and look forward to your questions.
Thanks, Chris that concludes our formal remarks as a final note before we begin Q&A, we plan to hold our 2021 on Investor Day on Tuesday September <unk> and St. Paul.
Operator, please begin the question and answer period.
Thank you we will.
Test and conducting a question and answer session. We ask that you. Please limit yourself to 1 question and 1 brief follow up question per caller, so that others will have a chance to participate if you'd like to ask a question. Please press star 1 on your telephone keypad, a confirmation tone will indicate your line is and the question queue you.
And now start to if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star Keith 1 moment, please while we poll for questions.
You made your first question comes from the line of Tim Mulrooney.
With William Blair. Please proceed with your question.
Good afternoon Christophe Thank you for taking my questions.
Thank you Tim and good afternoon.
Okay, So I want to focus on raw.
Raw materials and price, which.
Which probably doesn't surprise you but.
In the face of raw material cost pressure and I think your typical formula is to increase price.
And to make up for the dollar amount in year, 1 and then the margin and you're too but in your press release, you said the recent pricing actions you took remain.
Head of input costs. So I was hoping you could clarify this language and little bit if you price minus cost dynamic is currently positive it sounds like you've already moved past phase 1 and you're essentially already on phase 2 which is working to rebuild the margin am I reading into that statement incorrectly or is that how you would characterize.
Or is it.
The general direction team is is right actually when I look at the first half of 2021 and so unlike a lot where pricing was that compared to the input costs. We usually good at that as well set to begin with now what has changed is that the indices as we've all.
<unk> C and you've seen that as well so during the second quarter so have changed.
For the much higher for the second half and that has indicated we had to change our pricing plans quite significantly it's been the third time, we've done it so over the last 12 months, we've engaged those new.
And as well with the whole team, we've indicated that as well so 2 customers and progress is good. So we were had market has changed a little bit.
And which forced us to change our plans as well and I feel good right now that we will be and a good place for the.
For the second half both in terms of dollar and progressively improving the margin and now to that point.
It's going to impact mostly Q4.
And he because it takes some time, obviously to agree with customers to get to that new pricing. So we will see a better improvement in Q4 than what we have expected.
Plant and a low or improvement in Q3 than what we had expected but overall so for the second half basically at the same place as what we had.
Planned initially.
Okay very clear thank you and the announcement that you guys gave publicly and.
And our press release that I think that was specifically related to.
<unk> industrial segment.
Presumably youre also seeing cost pressures and institutional and health care as well are you implementing price increases across those divisions as well or is this really a conversation about industrial primarily.
We're implementing price increases in every business.
Every year.
This is really a practice that we have.
[laughter] coached our teams and our customers.
For the many past years as well really making sure it's not an event, but it's really something thats happening every single day are really driven by the value we.
This is part of our customers and not directly driven by input cost, which is 1 of the elements obviously of the discussion so youre right industrial so it takes the heaviest or biggest part because of that cost structure. This is nothing new and they are really good at it so.
We created a rate you have the price increase is easy and industrial but the other businesses are moving up as well at the same time.
Understood. Thanks Christophe.
Thank you Jim.
Your next question comes from the line of Manav Patnaik with Barclays. Please proceed with.
The matching.
Yes. Thank you I just had a broad question, which is.
What do you need to see happen and in terms of visibility before you can start giving.
<unk> guidance like you used to I was just hoping you could help us to some other moving pieces, maybe beyond just does the day and tables.
Yeah, Hi, Manav.
Good question. So it's all related to the variant Delta or day as it's cold out there as you know if you look at the past 20 years.
Always delivered so within our guidance with the exception of non 11. Unfortunately.
Your question 3 years ago, so for us the level of assurance and certainty is is very high and we focus on everything we can control, including questions of price and inflation as we just discussed the Delta variant is something that is really unusual hard to predict.
So as well so that's the only question Mark that we have out there to clear things are going to become with vaccination rates with how governments and countries are reacting as well out there.
Bring us closer to us providing <unk> guidance, but we will get back to that we liked it.
It's something that has been good for us and for investors while at the same time. So we will get back when when time is right, but so far I'd say, if things do not change materially.
The directional guidance on remains true.
And we will firm up as soon as Varian DSO becomes more clear.
And it and just maybe on the margin front.
And if pricing is the habit.
Cost and you've obviously lots and lots of I think in terms of efficiency from the past 15 months and so just so just curious.
Incrementals and the incremental margins and the business should we think of that is getting better and more of the same.
And any color there would be helpful.
Overall for the second half, it's going to be the same but obviously so the input cost has changed quite dramatically and the pricing has changed as well so quite a bit we had initially thoughts of other full year that our input cost would increase going on.
Mid single digit that was the initial plan.
The way, we look at it for the full year now so at closer to double digit numbers, so quite a change and we've changed the pricing as well for that be good at it as well, but let's keep in mind as well that in order to get there.
Margins.
Back to where they used to be we need to double the pricing versus the input costs. Since we have a gross margin of 50% so easy math.
As such so overall good situation in terms of pricing versus input costs second half is going to deliver a similar improvement and what we had expected but as mentioned.
And by the pacing between Q3, and Q4 will be different just because we need some time in order to get the agreement with customers.
Alright, thank you.
And Ah.
The next question comes from the line of David Begleiter with Deutsche Bank.
Earlier I proceed with your question.
Thank you Christophe just again on price versus raws in Q3, do you expect pricing to organic seed input costs and in this quarter.
Yeah.
Yes.
And the price will be ahead of the input cost.
And as mentioned before so our objective is not just to get there but to get back to the margin and percent that we used to have and that takes a little bit more time, but so far things are going really well.
You mentioned again in Q3 being below your initial expectations with that catch up in Q4.
Please how much lower if Q3, you're going to be.
And your prior expectations on a sequential earnings basis.
This is hard to tell because it depends on agreement with customers and it's a question of weeks plus 1 or 2 months, we do that very thoughtfully with our.
And so we know the commodity driven company and as you.
We are all driven by day value, we create for our customers with whom we've had relationships for decades.
So we are very careful in how we do that really in order to make sure that a year from now while they still believe that we did it.
Cash equate that it was good for them, while it was good for us as well so it's all a timing depending.
Q3, and that's why I'm, directionally, saying, it's going to be a little bit pressured in Q3, and it's going to be better and Q4.
Very good thank you very much.
Thank you David.
Your next question comes from the line of Ryan Connors with Boenning and Scattergood.
Hey, Thanks for taking my question.
My first 1 was just on you noted that the institutional results were actually not only.
Up nicely year over year, but actually outpaced the end market at least as you saw that can you.
There was some color around what metrics or quantitative metrics you have around making that assertion and then talk about how sustainable that is going forward and is that just a snapback and some specific market share and or do you think you can continue to outperform.
And as institutional recovers.
I like where we.
We are.
In the U S, especially since it's where the recovery so as happened first both thick and off the China, obviously about the sizes completely different maybe just to give you.
A few numbers is winning here you look at the restaurant.
And the sales so we're.
Kind of give a 9% down so for us or 91% back to where they used to be which is a better way to look at it.
And percent of the and you need to still have closed as well out there so and the market and the dine in traffic, which means so and the dining rooms, so was down 37% as well in the second quarter.
And so with us being 91% of where we were before so he is much better than where the market is and the second perspective is also we measure how many restaurants a hotel for that matter. So we serve and how many solutions day by as well and we are back to the levels that we were in 2000.
And 19, knowing that the traffic is not as high as it used to be so when traffic is coming back up as well our growth is going to pick up further as well so I see that the sustained development.
Okay, and then on the flip side, there was a lot to link and a report, but health care was a drag.
<unk>, which.
And then I guess, we know that last year was the impacts of the pandemic, but.
A little bit surprised to see that can you give us some dynamics around that is that sort of more virtual medicine is driving that and.
What's the outlook for that.
Healthcare as we move into the recovery.
No. It's just a comparison.
Vs exceptional results last year, driven by that pandemic. So we can peering soft 12, and 13% and growth in healthcare and Q2 of 2020, and 53% growth and life science as well so in Q2, driven as well by pharma demand.
And as well and infection prevention solutions as well and the pharma sector. What's important to me is really to look at the underlying growth. So when we strip out so and.
Unusual demand of 2020, and 1 timers you see ahead scare so and mid single digit which is better than where.
We used to be so these 2.3% and the bump has moved so closer to the 5% ish and life science as well on underlying is in the double digit territory.
Very good so it kind of sustained growth as well going forward. So when you strip out the noise basically you get to this mid single and double digit growth.
And health care and life science, respectively.
Got it thanks for your time.
Thank you.
Your next question comes from the line of Gary Bisbee with Bank of America Securities. Please proceed with your question.
Hey, guys. Good afternoon first question on.
And for margins and I wanted to ask a little differently, obviously institutional still down from pre pandemic levels quite a bit along with the revenue and the volumes, but the other 3 segments all had second quarter margins head on.
Second quarter of 19.
And I know you've had ongoing costs.
Production efforts and Theres a lot of moving parts, obviously with the input costs and the short term and everything else, but outside of institutional which presumably will continue to see the margin recover with revenue.
For the other 3 businesses.
Is the margin this quarter, a reasonable number to use to think.
Moving forward other than maybe a little bit of raw material hit in Q3, and maybe you can get that back in Q4 or what are some of these that are still way above the 2019 margin is there risk of some further give back.
At a more normal go forward margin.
Outreach and the segments. Thank you.
The all 3 segments saw a bit and different places, but the headline is that the margin trends.
Alright, good and vacation overall of where we are and where we hedging, but if I could just unpack them.
And just for you saw Inc.
Sure first.
Yes, he is growing but as mentioned before so is impacted the most by the input cost and it's always the case, so nothing unusual and here. They have all also the biggest share and pricing and they are really good at it as well at the same time so.
Current elements of cost and price.
And the upfront, but ultimately so.
Industrial is going to keep its development so.
And in gross margin and we expect the overall year or so to stay fairly close to where it used to be as well so last year.
Health care and life science.
As mentioned before so we compare.
And I would bring 2 very unusual as the growth numbers.
In Q2, as well last year, and if you strip that out ultimately so on the margins have improved very nicely.
2020, and we expect as well.
And life science, so to get quite close to where we were in.
In terms of.
On peer margins in 'twenty, 1 and as you mentioned so institutional is on its path to recover.
So it's maybe some of the business where the margin we had in Q2 the improvement in Q2, so it was a bit overstated.
Because we compare in 2020.
Record with 2 special events. The first 1 was the bad debt that we recorded for obvious reasons in Q2 during the beginning of the pandemic and second we foregone and as well so the lease payments for dish machine. So you compare it to something that was lower.
So it's going to change a little bit and Q3 and Q4.
But overall for the company good situation and margin and assuming that our assumption of USD 4 roles and pricing.
And as planned which I do ultimately so margins should keep evolving as expected.
Great. Thanks, and then a quick follow up.
I mentioned in the prepared.
And as well.
And you put out there refocus and mining away from coal and alumina.
Alluded to that and the path, but also I saw and downstream.
On the low margin refinery exit.
Are these are these material or is this more difficult and it's coming out of the pandemic trying to.
Fair and refocused the portfolio on the best opportunities.
And any color on on it.
And there is any other strategic yes, Gary it is.
And the ladder. So it's really so refocusing the portfolio towards the better opportunities.
Mining point moves.
Away from coal and refocusing towards.
Fertilizers for instance, which are related to AG into food and some.
Thing that 3 spell TWC is a way before.
On the pandemic and it's working really well so our exposure to coal so it has become minimal over the bulk.
Moving use and our exposure to the growth segments. So has become much better as well so risks are lower and growth potential.
Here.
Which is which is good on the downstream side.
It's a big difference.
On stream.
It's a bit of a fatigue.
<unk>.
Stories eating here, so you have Petro Chem.
And kind of plastics.
Which is and end market, that's doing well we've been growing for a long time, we all still growing right now and when we were growing during the pandemic. So this is and end market that we like and and end market.
Get that we wanted to further focus on and we are bringing new solutions as well so to recycle and better Plastique for instance, which is very traditional with sort of a sustainable solutions approach for this business and Dan and the last point is refining.
Which is an industry that is in a complete transformation as we hold.
And so they have to reduce their footprint in terms of carbon footprint as well in Europe, and that's going to take a few years so for us to get the right in the way that we had refineries first to produce we saw lower carbon footprint and very good.
Pilot project.
And those companies as well refocus on renewable as.
So unlike where we going here, but thats going to take quite some time in order to get to a place weighted sustained high level growth as well and refining so that's the way I would express it.
Thank you.
Your next question comes from the line of John Mcnulty.
And with BMO capital markets. Please proceed with your question.
Yes. Thanks for taking my question. So I guess, maybe maybe 2 quick ones just with regard to Europe, and how you see the reopening.
Industrial reopening and.
Packaging businesses can you give us a little bit of color or thoughts on how to think about things sequentially from <unk> to <unk> and the pace of that reopening for for both the institutional and the.
And the industrial segment.
Yeah.
Hi.
John.
And Europe.
And our Grand reopening.
Happen until early Q3.
Good day that way.
Rides as well and the newspaper AD channels, and so I'll just spend a few weeks and as well in Europe. So towards the end of June and Europe was clearly closed.
And then until June and then suddenly.
We opened everything so we've really seen a pick up.
And our institutional business, so first and foremost because kind of went from zero to kind of open Apis.
That's quite a dramatic change and we've seen that in our numbers, so very encouraging trends and institutions in Europe.
Suddenly and we see industrial which was in a very different place. They went out and closed obviously like restaurants and hotels.
Improving as well so overall.
Europe doing okay, so far and international overall as well, it's an interesting perspective as well to.
Our up and mind, where last year international was kind of flat, which means outside North America. So it was kind of flat for the whole company and we see it coming back to growth not only in Q2, but it's going to get even better and Q3. So good news from that front too.
Got it.
That's helpful color.
And I guess from a raw material perspective can you speak to whether or not and you had any issues in terms of sourcing raw materials and if that had any impact on the business or is it really just been a function of inflation and just getting that through in terms of price.
It's a great question the market is tight.
And the Texas phrase made it harder obviously you saw in February for everyone out there and we look.
Enough to have a great procurement team a great supply chain team as well that could that could find alternative sourcing that could work formulate.
<unk>.
Overall, it's been heavy lifting within the organization that we've been able to supply our customers.
And a fairly continued manner during the second quarter, and we see that improving as well in the quarters to come so bottom line a lot of it.
Work, but they're.
<unk> seen soft helping customers being supplied as they should.
Great. Thanks, very much for the color.
Thank you John.
Your next question comes from the line of John Roberts with UBS. Please proceed with your question.
Labor is an issue for your Institute.
Institutional customers right now at least here lobster software or any of your and other digital offerings and enabling you to help your customers with their labor issues.
It does actually we are expecting to have close to a million users.
Flips to Inc, and a tier which is driven by exactly what you're saying.
Those labor shortages and hotels and restaurants are creating new challenges for that industry. They need to train a lot of people coming into our restaurants and hotels and that kind of solutions are definitely helpful. So that's the good side of the story.
And then could you talk about some of your other new product offering so many other new.
New products like fast acting hard surface cleaners had a surge last year, but are you still penetrating new customers, maybe talk about it in terms of market penetration or customers that you're adding.
We are actually.
When you think about it the fact that we have as many restaurants buying as many solutions.
<unk> as pre pandemic today, and a market which has seen.
And it saw declining by 15% during that time is a direct.
First and foremost ecolab sign certified which is the circle the customer.
Program since the pick estimates hedged to buy older solutions.
In order to be certified as such and so that's been a great story, that's progressing very well and you've maybe seen that Mcdonald's as well for instance has endorsed as well that that program as well as our corporate companies a great story here.
Which has driven penetration of.
Units and solution, so really good and Youre right. So when we think about sanitizing products.
And we've refocused quite a bit over the last 18 months, partly driven by dip and then make as well on the surface on each sizes that we brought on the market are doing really well.
By the way and we still see so double digit growth versus.
We had some pre pandemic, which is a good sign and we will keep innovating as well and that like with disinfecting wipes.
For instance, as well so we've acquired 2 companies 1 in the U S..1 and the U K in order.
And supply as well.
That market. So so far so good on the innovation front and especially on the disinfecting side.
Great. Thank you and this quarter.
Thank you John.
And next question comes from the line of Kevin Mcveigh with.
Order to credit Suisse. Please proceed with your question.
Great. Thanks, so much hey, I wonder.
Just a point of clarification, the 4% price increases is that across all of ecolab or just the industrial business and if its across all is it.
75% industrial or just any way to frame up that 4% increase.
You talked to.
Yes, hi, Kevin So a full percentage for the whole company.
And you will have more and industrial.
That's where we bear the brunt of the cost increases as well, so youre going to have higher than 4 in industrial and.
Overall other businesses, you're going to have lower than 4 as you mentioned.
Got it and then just within kind of the downstream business overall as you clearly repositioning that.
Any thoughts as to what percentage of revenue refining today and.
And then where that ultimately bottoms and ultimately.
And indeed, you go on into kind of higher growth areas as well just add on 100 percentage of ways to think about those end markets just within the downstream business itself.
It's hard to tell but I would say that we've reached the bottom.
And.
In the refining part of downstream right now so Petro Chem Sol has.
Doing well all along.
As a bit of a different story, obviously as such so I think it's going to improve progressively.
As of as of now.
And in downstream refining, but its going to take us.
A year or 2 to get to the right place.
Before we begin say, so which really like the trajectory of that business. It's an industry that is and total transformation as well. The good news is that we are uniquely positioned.
And to work with those companies to help them get to the better place I've had great discussions with some of the Ceos of those companies lately as well.
Place need us more than ever and.
Especially true with European companies.
That's also in the U S. So longer term I think it's going to be a very good opportunity for us.
Thank you so much.
Thank you Kevin.
Your next question.
Based on the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.
Thank you and good afternoon, you mentioned in the prepared comments and.
Specialty and the food retail business that you were seeing.
Sales reversion as expected and some of it I think coming from less consumer demand.
And but also that the labor issues.
On the customer perspective and.
1 of those things seems temporal and the other 1 it seems sort of a little bit more structural so could you help us understand how to think about those trends on a go forward basis.
Yes, Hi, Vincent so it's really because we are comparing to.
<unk> strong Q2.
And <unk> comes.
And in specialty.
Last year it is.
As a business that's doing well.
So he took on Verizon question on underlying so unlike a lot. So we're quick serve and food retail all heading very strong businesses and very profitable and servings.
And 2 successful industries.
Right now as well so it's ticked up a reason and that's kind of a little bit so skewing the numbers otherwise underlying very good and I see a future that's going to keep steady on what <unk> seen pre pandemic as well with those 2 businesses.
Moving and then just as a follow up I assume you're on track for the $120 million of costs and you've targeted for this year and I think the total number overall eventually there will be $3.65 billion and still the right numbers.
Yeah, Let me give that question to Dan who is looking forward to a question as well there. So that's a perfect opportunity and stuff.
Thank you and it's such a great question. So thank you, yes, we remain very much on track to deliver our incremental $120 million year on year and more broadly maybe the 2020 program, which has gone through a couple of iterations, we feel very good about the progress that we've made sequentially and.
We will continue to okay.
Thanks, so much.
Your next question comes from the line of Scott Schneeberger with Oppenheimer. Please proceed with your question.
Thanks, very much and my first.
Wanted to enquire about new business wins.
And a lot of the description today has been recovering markets, but we and the press release, a lot of highlight and new business wins.
And that's a cross walk.
Water of paper signed.
<unk> and certified and talked about and even past can you just elaborate a little bit on maybe where you're getting the most strength and what type of wins you're getting thanks.
Great question. Thank you Scott So new business Interestingly enough is gaining traction in every end market.
And we felt that in some markets like the institutional markets over the past 18 months. It would have been way harder actually each 1 of the.
The areas, where we've made the most progress.
Is really good news.
Industrial is doing really well and.
Healthcare as well and life science has always been great at it which we see and the numbers.
So really good story I would say.
1 of the new emerging stories and new business.
This is what many gold is.
Net zero.
And with many customers so trying to get closer to the sustainability ambitions, so Walter and mutual of water positive carbon neutral carbon positive and those discussions with those forward looking companies and interestingly enough.
By strengthening our relationships with them because they need our help even more than before and thats growing as well, so our new business opportunities because they need our help in older units around the world and need multiple solutions as well from us in order to get closer to the net zero ambition. So that's 1.
And 1 of the new drivers that we're seeing emerging which is good.
And with company.
Great. Thanks, and then I think a good follow up to that would be just to ask specifically on data centers and animal health some of your other emerging growth.
Opportunities and just a progress report there and.
I'm quantification on on pace of growth or margin expansion.
<unk>.
Yes, so starting we've got our centers as I mentioned earlier and so we've been growing.
53%.
And the into second quarter, it's been a terrific story.
And as part of our life water industry as business in the <unk>.
Past, we've created a dedicated unit 12 or 18 months ago.
It is really a division that's focused on data centers and microelectronics by the way the Intel of that world.
As well and interestingly enough.
Used to be new expertise that we could build its new offering that we could provide to those companies that are really interested and close to 100% uptime for all the reasons that we understand our secure solutions as well from a digital technology perspective, they want to make sure that any access that we have with them is.
Totally secure web well and those are companies that are very sustainability friendly as well. So they all want to get so close to the net zero as fast as they can all of that is really driving that business and a <unk>.
<unk> animal health is a complete different story.
Obviously.
Is done and as such this is something that takes time as well we've created a dedicated unit we've made acquisitions.
Well and in that she is underlying our like where we're going.
Q2 has been a bit soft ball, because we compared to a very high Q2 in 2020, but thats a business thats going to.
Usually interesting going forward for at least 1 important reason.
Most of.
Farmers won't be on other allowed so to use antibiotics.
To protect the animals and they need more solutions in order to make sure that they are in a healthy environment in order not to get sick.
Be very it is exactly what animal health is doing.
And in our business. So, it's an evolving proposition, but thats clearly aligned with the longer term trend that customers and consumers like you and I ultimately I expecting so from the food manufacturers.
Okay. Thanks, Christophe I appreciate the color.
Thank you Scott.
Your next question comes from the line of Rosemarie Rosemary.
Belly with Gabelli and company. Please proceed with your question. Thank you and then learning and stuff anyway.
And I.
I was wondering if you could calculate.
Alkylate and a bit about M&A, you have been making small acquisitions.
Do you have an appetite for larger ones and.
And then targets that you would be interested in.
So the short answer is yes.
Yes, we are interested in.
M&A and larger.
So we've done smaller ones over the past few months as mentioned earlier.
And the wipes area, which is.
Complement to our offering and institutional and healthcare and industrial and we couldnt produce that ourselves and we were told manufacturing.
Other companies and we've seen during this.
And then make that that could get great business so for us.
Good day, and especially growth going forward. So we've done that as well we've done on animal health as well last Europe.
And just mentioned as well as the previous question and we've been extremely active on the <unk>.
M&A front over the last 6 months.
Do you have a very rich pipeline, we have very serious discussions with many as well out there, but at the end of the day.
We have been very disciplined on line.
On what we do and what we don't do and when I look at all the discussions that we've had so far we didn't.
Find the exact opportunity so right now, but I feel confident that.
In the future. So we will get to a bigger opportunity at the right time and.
And you share with us any particular area.
And that can lead to.
And a larger acquisition.
So.
And I can't go too much and Djs Rosemarie for obvious reasons, but the core areas of water is interesting so for us life science, which is.
Very successful business, serving a very large and high growth as well and market.
And third so related to digital technology.
Well. So those are kind of 3 areas that are very interesting for us.
Alright, and then if I may what is the size of your animal health business guarantee.
I'm not sure.
And you close that so far and you can do it and that 100 million, let's put it that way and Rosemary and sorry did you say 200, a few hundred a few hundred.
Alright, Thank you and good luck. Thank you so much was 9.
Your next question comes.
Sure, we fly and of P. J <unk> with Citi. Please proceed with your question.
Hey, Christophe, it's Eric Petrie on for P. J.
And you noted your and how did you were gaining share and U S. Restaurants. I was wondering if you had a similar data point on lodging, and then and bullets restaurants, and lodging how does that compare and.
Comes from Asia.
Yeah.
So and my comment was mostly focused on our restaurants because.
It was a highly impacted area I like the progress, we're making in hotels, a lot as well and mostly because of the offering that we.
We provide them in terms of.
Alternation ease of application of our solutions, you've heard about the staff shortages that they all have I've had the chance to talk to a few Ceos as well so lately from large hotel chains and U S and abroad and this is top of.
Europe, and so for that and so the solutions that we have which are new those are things that we've been doing so for many many years ultimately helping them clean quicker, which is something that really still challenged with right now or and <unk> as well so to clean dishes and an easier way passed away.
<unk> labor as well the same on the water at the same on housekeeping and.
So on and those are solutions that are ultimately, helping us sell new business and lodging. So good progress and lodging as we've seen as well and foodservice.
And just a follow up and to clarify would you say youre gaining.
And we've learned restaurants, and Europe, and Asia, as well or is that not settled out.
We have less and.
Members over there and to be honest. So those markets are reopening right now so we've gained new business.
And you have to see how it looks and practice then afterwards, so I think that in the month and quarter to come.
It will be and a better position to really share salt, whether we've gained which I believe we will but I'm going to have the facts for us or.
And what not.
Okay, and second and my follow up question how.
And we hear sanitizer and hard surface cleaners.
Sales down in the quarter and and what do you expect in terms of moderation for second half.
So sanitizing sales, so where you so just to put in perspective, it's 8% to 10% of our overall sales.
How much for the company.
Had significant growth.
Last year, and we expect to be lower than last year. Overall, so we don't disclose all the detailed numbers, but quite a bit higher than 2019, and thats, probably the way you need to think about that.
Lower than the peak of the pandemic thank God.
Higher than 2019, because practices have changed in most end markets and countries.
Thank you.
Your next question comes from the line of Laurence Alexander.
And that's all Jefferies. Please proceed with your question Hi.
Just a quick 1 on the follow up on the discussion earlier on the shifts away from some of the lower margin businesses like refining.
If you look at the moves you've done over the last couple of years can you give a rough sense for how much.
Sales you've moved away.
And with some sort of some of the out of pay per business segment.
And the last couple of years and how much stronger yourselves on would've been if guidance on that calling up the mix.
Great question on Laurence, but I have no idea because it's something that we're doing all along in every business day.
Focus is really saw a move up the chain move up demand.
<unk> proteins.
Don't be driven only by pricing needs to be because we are focusing on the higher margin segments higher margin offering as well so it's a continuous work.
We're in some areas, it's more extreme like the coal as mentioned before.
Refining.
More downstream that our most significant but I couldnt put a number exactly on that because it's a continuous process.
Thank you.
The next question comes from line of.
Shlomo Rosenbaum with Stifel. Please proceed.
Induction.
Hi, and good afternoon, and thank you for taking my questions Christophe I wanted to ask you a little bit about <unk>.
Other companies leveraging the technology investments.
And as it approaches the C level of and the organization in terms of their sustainability. So I'm understanding is and this is enabling.
<unk>.
And with your quick start discussions with the C suite as opposed to starting discussions more at the plant level and I'm wondering.
How are those discussions progressing is there an increased pace or are you seeing a large potential to accelerate or and incremental potential for you to accelerate equal labs revenue growth by being able to sell further.
Lab to change within the organization.
And thank you Shlomo this is a great topic.
On 1 more time and so we view on that but maybe so 2 quick answers the Watson and Beth Howe.
First on under what we have always more cash.
Estimate.
And the new but it's clearly accelerating so guest.
Customers that are asking us so partnering with us in order to find a path in order to get to net zero or positive.
Water or carbon and Microsoft being 1 of the obvious ones and its not the secret since they've been expressing that on CNN.
Over the past year or so so in order to get there you need to have digital technology, because you need to understand to make it easy to recycle water.
Which is a physical product, we need to understand and real time to quality of the water or like thereof, actually which indicates what kind of chemistry.
And so I mean, we need and what kind of technology is required in order to bring it back to the standard level, that's being used and a data center or in a food plant as such this is a direct application of our digital technology and second is done is.
Is the how since we are serving.
<unk>.
<unk> out there in the World. We are uniquely placed to know what's the world class performance that can be achieved take.
<unk> for instance, how much water per hectoliter of beer Thats being produced we can compare.
Within the company Brewing company.
How does the performance of the individual plants compared to the best and clients, we can compare across Brewers as well, we can compare across industries as well as the company as well. So we can provide customers with good benchmark of what good looks like and second half to get there as well that's all enabled by.
Digital technology that we've been building developing and implementing so over the last 10.20 years around the world.
Okay.
And so is that.
And I guess just to keep that go on there.
Do you see a potential for that to really.
Incremental improve.
Improve the revenue growth and the business because youre able to sell.
And at these higher levels, obviously, you bring the capabilities that that other companies can't bank on the table.
Yeah, absolutely. So what you saw was that our centers. So the growth of 53% is directly driven by that.
And 1 of light.
As well, which has been growing 7% as well and the quarter is also driven by that kind of solutions. So early indications are positive and the more we can implement that across the end markets. The more it's going to help us as well as a company.
Okay, Great and if you don't mind my sneaking in 1 more.
Is that are completely open now in terms of restaurants, let's say, taking the Florida, Texas, how does the chemical usage compared to what it was.
Pre COVID-19, what other levels in the restaurants that were customers before and there are still customers.
It's still lower today.
Slow Mo because the dine in and so there.
Dining rooms are.
And as mentioned before so in Q2.
37% down so vs.
Pre pandemic.
As such which means that the usage of.
Cleaning and sanitizing solutions.
<unk> has been low as well, but as dine in is going up so the demand is going up as well at the same time. So the fact that we had the same number of <unk>.
And it's buying the same number of solutions today.
This is a good sign as well sofa compounded growth when dining is going.
And the pickup as well in the weeks and months to come.
Thank you.
Thank you Shlomo.
Ladies and gentlemen, there are no further questions at this time and I would like to turn the floor back over to management for closing remarks. Thanks.
Thanks, everyone that wraps up on our second quarter conference call.
Call and the associated discussion and slides will be available for replay on our website.
Thanks, very much for your participation today and have a great rest of the day.
Ladies and gentlemen, thank you for your participation and this does conclude today's teleconference. You may disconnect your lines and have a wonderful day.
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