(ECL) Ecolab to Purchase Quimiproductos

Ecolab Inc. (ECL) recently announced a definitive agreement to acquire Mexico-based Quimiproductos S.A. de C.V., a wholly-owned subsidiary of leading consumer goods company, Fomento Econ (FMX). No financial details of the transaction were provided by the company.

Quimiproductos produces and supplies cleaning, sanitizing and water treatment goods and services to breweries and beverage companies located in Mexico. It also has several operations in Central and South America. In 2011, the company generated revenues of $35 million.

Ecolab has a significant presence in international markets, with Asia-Pacific and Latin America representing the key growth areas for the company’s overseas operations. We believe that the acquisition of Quimiproductos should further boost Ecolab’s Latin American Food and Beverage business.

In the reported quarter, revenues from Ecolab’s International Cleaning, Sanitizing & Other Services segment increased 5% on a constant currency pro forma basis to $796.5 million. On a constant currency basis, Latin American sales increased 20% in the quarter. Solid demand in the beverage and brewing markets along with new accounts and investments in strategic sales areas led to double digit growth in the Food and Beverage business in this region.

St. Paul, Minnesota-based Ecolab serves the foodservice, food and beverage processing, healthcare, and hospitality markets both in the U.S. as well as internationally. We are encouraged by Ecolab’s consistent performance of delivering double-digit earnings growth despite the challenging business environment.

Ecolab continues to invest in strategic areas such as healthcare, food, water and energy and global pest elimination to expand its business. Management is currently emphasizing on product innovation, sales organization, volume growth, appropriate pricing, and merger synergies along with rationalizing operating costs.

However, despite strong international exposure, we remain cautious on Ecolab owing to the aggressive competition from the likes of Clorox (CLX) and Church & Dwight (CHD). Raw material price inflation and higher delivered product cost continue to be headwinds for the company. We currently have a Neutral recommendation on Ecolab, which carries a short-term Zacks #4 Rank (Sell rating).
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