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<p>Minnesota-based Ecolab, which offers cleaning and sanitizing products, water treatment systems, and consulting services, aims to reduce water use. Ecolab provided its expertise in water technology and digital monitoring solutions to Moeve, a leading Madrid-based energy company, to develop a circular recycling system, lowering water use at San Roque Energy Park, a refining, chemical, and biofuel production hub in southern Spain. The system sends a reusable stream back into San Roque’s operations by means of a membrane water system, ultrafiltration, and specialized chemistry. The collaboration between Moeve and Ecolab reduced fresh-water intake, and the San Roque lab was able to recycle up to 317 million gallons of water per year and cut down on exposure to risks from drought. 
</p>

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F500-2021-237-Ecolab

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Change The World

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Ecolab provides water, hygiene, and energy technologies and services that support safety, sustainability, and operational efficiency. The company serves a wide range of industries including food service, health care, hospitality, and manufacturing. Its solutions include cleaning and sanitizing products, water treatment systems, and consulting services. Ecolab operates globally with a focus on helping customers manage resources and meet regulatory standards.

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Q4 2024

Ecolab (ECL): Company Profile, Stock Price, News, Rankings

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Ecolab

ecolab

Greetings. Welcome to the Ecolab First Quarter twenty twenty five Earnings Release Conference Call. At this time, all participants are in listen only mode. A question and answer session will follow today's formal presentation. As a reminder, this conference is being recorded.

At this time, it is now my pleasure to introduce your host, Andy Hedberg, Vice President, Investor Relations. Mr. Hedberg, you may now begin.

Thank you, and hello, everyone, and welcome to Ecolab's first quarter conference call. With me today are Christophe Beck, Ecolab's Chairman and CEO and Scott Kirkland, our CFO. A discussion of our results, along with our earnings release and the slides referencing the quarter results are available on Ecolab's website at ecolab.com/investor. Please take a moment to read the cautionary statements in 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 in our most recent Form 10 ks and in our posted materials. We also refer you to the supplemented diluted earnings per share information in the release. With that, I'd like to turn the call over to Christophe Beck for his comments.

Thank you so much, Andy, and welcome to everyone on the call today. Really pleased to share the results of another strong quarter of double digit earnings growth, thanks to our team's focus on delivering best in class outcomes for our customers no matter what. This is Ecolab at its best, demonstrating the strength of our team, our proven operating model and the breadth and health of our business. Our superior performance reflected solid 3% growth in organic sales and strong 12% growth in EPS as we continue to significantly outpace soft end markets. This was driven by our team's ability to achieve attractive market share gains through our One Ecolab growth initiative and increased value pricing, all supported by our focus on delivering exceptional value to our customers as we've always done.

This good top line momentum along with improved productivity from our investments in digital technologies drove 190 basis point increase in our operating income margin. And this marks another important step in executing on our objective of delivering a 20% operating income margin by 2027 as we've talked many times. Well, looking ahead, the complexity of the global operating environment is increasing with softer end market demand and rapid changes in international trade policies. With external conditions changing, we are naturally making proactive adjustments to our near term delivery path. But importantly, our overall expectations for earnings this year remain unchanged.

At the same time, we're continuing to make smart investments in our growth engines to fuel our top line, expand our margins and build our future. So let me spend a few minutes on each topic to share what we are seeing and explain why I believe we're well positioned to deliver strong year and long term performance. First on demand, we saw end market trends soften a bit, particularly in the heavy industrial markets as customer production rates in some industries have eased. We outperformed these trends because the technologies and services we provide to our customers are absolutely critical to their operations as they leverage our latest breakthrough innovations. And additionally, we also helped them significantly reduce their total operating cost, which they need now more than ever.

And this led to a very strong new business in the first quarter, kind of a record actually. These were broad based wins across our businesses and markets around the world, showing that our value proposition continues to resonate with customers. When demand has stabilized over the past few weeks, we expect it to remain soft for the remainder of the year. As such, we remain on our fully focused on generating new business and on installing our strong existing new business pipeline to continue to outgrow our markets and as always to gain share. Now regarding the rapidly changing global trade environment, we're much better positioned than most, but we're not completely immune.

Our robust and agile global supply chain is a true competitive advantage that sets us apart in the marketplace. And as we've demonstrated for decades, we care for our customers when they need us the most. No matter what, we will never ever let them down. Through our local for local model, we've strategically positioned ourselves so that more than 90% of our sales are produced close to our customers, allowing us to effectively navigate challenges like this with quite a high level of confidence. We're therefore leveraging the strength of Ecolab to mitigate the impact of the 10% global baseline tariff.

However, global tariffs greater than 10% and the 145% tariff placed on China are having broader impacts on the cost of some raw materials, packaging and some equipment. Even though we don't import much from China, we expect the annualized impact from tariffs and increased local supplier cost due to higher onshoring demand to be a few hundred million dollars. To mitigate this impact, we recently announced a 5% rate surcharge for all customers in The United States only. This surcharge leverages the tools and capabilities we built a few years ago to ensure we can reliably supply customers while also delivering value to them that exceeds the total price increase, so it's a win win situation. So we expect the benefit from the trade surcharge to build over the coming months with full implementation beginning in third quarter.

As a result, we anticipate organic sales growth in the second quarter to be similar to slightly better than the first quarter as we accelerate in the second half. While we focus on executing well to overcome the challenging near term operating environment, we are also continuing to invest in our long term growth engines, including Life Sciences, Pest Intelligence, Global High-tech and Ecolab Digital. Each of these engines are at different stages of development that all are performing very well with attractive long term growth and margin potential. Life Sciences, which is now a stand alone segment, grew organic sales mid single digits and delivered organic operating income growth of more than 30%. With this, our biopharma grew sales double digits, driving attractive share gains as we leverage our investments in breakthrough innovation, global capabilities and capacity expansion.

Further investment in this attractive business will continue to have a near term impact on operating income margins. However, we firmly believe this positions Life Sciences very well to accelerate its long term growth and deliver operating income margin close to 30%. Our Pest Elimination business continues its rapid deployment of best intelligence, Ecolab's proprietary digital solution that provides real time insight into best activity for customers across their enterprises. This program is growing extremely fast, and we're able to deliver even better best free outcomes for customers with enhanced service capability. As mentioned during prior calls, we're investing heavily in this program, which has impacted growth and operating income growth near term.

We'll begin annualizing these initial investments pretty soon. And as a result, we expect operating income margin for this segment to get back closer to 20% in the second quarter. We expect this program to fuel continued attractive sales growth and even further margin expansion as it's deployed over the next few years. In Global Hi Tech Water, business continues to perform exceptionally well as we deploy breakthrough innovation to the significant and expanding market. Global Hi Tech sales growth accelerated to nearly 30%, leveraging our leading innovation and global capability to develop water circularity for microelectronics productions, as we call fabs, and high performance cooling for data centers.

promised, this quarter we began reporting top line performance for Ecolab Digital. This includes lease revenue from technology hardware like three d Tracer and software subscriptions like water quality intelligence.

In the first quarter, Ecolab Digital grew sales twelve percent $80,000,000 or $320,000,000 on an annualized basis, driven by extremely strong growth in subscription revenue. We expect this growth rate to accelerate throughout the rest of the year and beyond as we expand our digital offerings across our customer base and across Ecolab businesses to capture more of this multibillion dollar high margin growth opportunity. As these growth engines continue to scale, we expect they will increasingly impact Ecolab's sales growth and operating income margins in the years to come. So in closing, we're clearly planning to win and we're very well positioned to navigate this complex external operating environment. And I'm confident that the best of Nicolab is still ahead of us.

Our unique capability to deliver innovative solutions that help our customers achieve best in class outcomes, enhance operational performance and conserve natural resources like water and energy, are needed now more than ever. Our strong and resilient free cash flow combined with an extremely healthy balance sheet with over $1,000,000,000 in cash and a 1.8 times net debt to adjusted EBITDA ratio puts us in unique position of strength to take advantage of both organic and inorganic growth opportunities. This in turn allows us to deliver even greater value to customers and attractive returns for shareholders. I'm confident we are well positioned to deliver another strong in 2025 and beyond. So thanks again for your continued trust and investment in Nikola.

Thanks, Christophe. That concludes our formal remarks. Operator, would you please begin the question and answer period?

Thank you. And our first question is from the line of Tim Mulrooney with William Blair. Please proceed with your question.

Hi. This is Luke McFadden on for Tim Mulrooney. Thanks for taking our questions. So I know you've talked about sourcing more than 90% of your raw materials regionally. So on the surface, it sounds like you're pretty well insulated from the trade war in any given region.

take, for example, The U. S, where you have many companies scrambling to onshore as much of their supply chains as possible and as fast as possible, is this having any kind of a second derivative impact on your domestically sourced materials? And just maybe as a follow-up, I was hoping you could just level set us on where you expect pricing to ultimately shake out in 2025 after taking into consideration the recent surcharge? Thanks.

Hey, thank you, Luke. Good to hear you. Well, first, as you said, we're in a very fortunate situation with our local for local strategy where 92% of what we sell is produced locally. We didn't do that for tariffs. Obviously, that's something that we've built over years, mostly to secure supply to our customers to have it at most of the MI's cost and it helped us for FX and now it's helping us unfortunately, if I may say so for tariffs.

So that's a very good place to be for our customers and our company. That's also helping us to mitigate the 10% that we're kind of expected for 2025. So we feel good about the overall plan that we had so far for 2025. Obviously, there are the two small exceptions, if I may say. You mentioned both of them, Luke.

On one hand, so China and the move from many companies, as you said, to source in The U. S, which drives prices higher as well at the same time. So talking about China, we don't buy much from them because 99% of what we sell there is produced locally, but we still import roughly €100,000,000 from China. But when you apply 145% tariff on top of the inflation on local sourcing here in The U. S.

Because of people. So ensuring as you mentioned, when you get to some meaningful numbers, hence the nominal trade surcharge of the 5% that will be entering in effect on May 1. So this trade surcharge will apply only in The U. S. And the commitment that we've made to our customers is also to make sure that the value we provide to them, incremental savings in their operations will overcome the total pricing that we are asking from them as well at the same time in a typical win win situation as we practice for many, many years with our customers.

So ultimately, to answer your other questions as well in terms of delivered product cost, we started the year kind of market was slightly up. Our net P and L impact was slightly down because of the efficiencies that our great supply chain and procurement teams could deliver. And if I look forward, so in the quarters to come, it's probably going be probably more towards mid single digit increase when we put everything together with everything we know now. Obviously, things can change in the weeks or months to come. And if I think about the overall pricing with the surcharge, I think we will get close to 3%, maybe better.

We will see how that works. But all in progressing, very well. I like how the team has gotten ahead of what's happening at the market and done in a way that's a win win for customers and for our shareholders as well at the same time.

Thank you. Our next question is from the line of Manav Patnaik with Barclays. Please proceed with your question.

Thank you. Christophe, in mid March, we had already started talking about seeing weakness in the demand environment broadly. And I was just wondering if you could give us an update since then. Have things gotten worse? Did that happen kind of in advance of what people see?

Just some flavor there and in terms of how we should think of that translating into the volume assumptions for the rest of the year.

It's a good question, Manas. In February, so the February, in the heavier industries that we're serving. And I was not sure if it would keep going down in in the weeks to come. And if I look back since we talked, a month plus ago, well, it dipped, but it can stabilize, at that lower level, since then, which I take, as a reasonably good news. But I don't take that as a given, for the rest of the year.

My assumption is that it's gonna keep, softening, in the months to come. It's not gonna be a straight line because of the events, happening out there. So as a team in a typically collab fashion, it's to focus on offense, it's to play to win, it's to focus on new business. The new business in the first quarter has been very strong. It's been a real record for our whole team.

So we're kind of generating our own tailwinds, which is why I feel confident that we should have positive volume in 2025. We see how strong that's gonna come. But as far as I can see, I feel reasonably good and the stabilization over the past few weeks is kind of at least short term reassuring element.

Our next question is from the line of Ashish Sabadra with RBC Capital Markets. Please proceed with your question.

Thanks for taking my question. I just wanted to focus on the Institutional and Specialty segment. I was just wondering if you could talk about the demand trends there, what you're seeing from a foot traffic perspective? And as you continue to drive the digital solution, how you can help some of the weakness we might see from a foot traffic or occupancy perspective? Thanks.

Yes. Great question, Ashish. Thank you. Generally, our INF business is doing really, really well. And it keeps on that trajectory, which is really encouraging.

Love what this team is doing. It's about gaining shares the right way by helping our customers, well, produce more meals and serve more guests while reducing their cost of labor and energy and water and waste as well at the same time. And it's important, so when we look at the overall number of INS, we know that we have Healthcare in there now, which is reducing one percentage point. The INS number, so Institutional Division is growing at 5%, very steady, very strong, very good. Specialty is actually underlying growing even much faster than what we see in our reported numbers because it was kind of the last quarter ish of a private label business that we decided to discontinue last year and that business is going to improve.

And there is also a natural shift in more difficult economic times from foodservice restaurants to quick serve restaurants, so that's going to have specialty as well. So feel really good about the I and S trajectory. Margins are improving nicely. It's not going to be the same improvement for every quarter coming up, but it's going to keep improving in the quarters to come as well. It's at the highest margin level it's ever been.

So in a very good place, good growth, doing the right thing for customers, margins improving. And innovation in that business, that's at the strongest point it's ever been as well. So really happy with what's happening in I and S, not in an easy situation.

Our next question is from the line of John McNulty with BMO Capital Markets. Please proceed with your question.

Yes, good afternoon. Thanks for taking my question. So you've been pushing the Ecolab One initiative pretty hard. I guess can you help us to think about the growth that the business saw for those roughly 35 accounts, say, versus the core, just so we can get a better feel for volume trends there in this kind of new big push initiative?

Thank you, John. It's the one Ecolab initiative actually, which, you're right, is, focused on on growth. So I'll be careful not to disclose too much, numbers, but, our focused accounts are progressing very well. Because if I remember, I'll remind you a little bit the broader picture. One Ecolab is to increase our share of the 55,000,000,000 penetration opportunity that we have, mostly with our corporate accounts.

And we started focusing on our job 35 that are doing really well. How do we approach them? It's best in class approach. It's basically so for each of those customers understand what is their best operating unit that they have around the world in terms of product outcome, cost performance, environmental impact and then drive that performance across their own network. We translate that obviously in a dollar TVD, total value delivered, and we give ourselves a few years to get there as well.

That's the general approach strategically. And one Ecolab as a program, as a platform, enables all that. So for our front lines to to get that done. So we're early on that journey, John. I like the progress that we're making here.

Customers are very interested in that because, well, it's cool insights to know what's best in class within my company or outside my company within the industry as well. And as you know, so on the internal side, from a productivity perspective as well, Wernicke Lab is improving and progressing very well, not in terms of cost cutting, but in terms of operational performance because of AI platforms that we're using in some critical processes. We're using agents as well at the forefront as well of technology. And so far, it's working really well, which is why we're ahead as well of our savings delivery on that program. So on both fronts, growth and performance improvements, we see some very good progress.

The next question is from the line of David Begleiter with Deutsche Bank. Please proceed with your question.

Thank you. Christophe, you announced a surcharge back in 2022 for energy. Can you remind us the success of that surcharge? How much did you realize versus what you announced? And would you expect a similar or higher realization on this surcharge this time around?

So the good news is that in in 2022, that was the first time we were doing a search out like that. Honestly, I knew that the team saw would get something done. I didn't know how quick and how much we would truly get, And it worked out really well. As we all remember, everything's stuck as well, got converted into structural pricing driven by value generated for customers as well, all in that win win approach between customers and shareholders ultimately here. So we had this 8% surcharge back then.

At the highest, it went up to 5% surcharge, then it got converted into structured price. So you lost track a little bit of what was the net impact of it. But it worked out very well actually here. So we see how it works on this one. It's the same platform.

It's the same approach. It's on one country, as mentioned. So just in The U. S, at least for now, we'll see what happens. So with the tariffs as well as going forward.

So it's not a perfect science, but generally, it works quite well. And really our objective is to mitigate, obviously, so the the incremental cost while driving even more savings at the customer location in order to make sure that we have something that is sustainable. So this time around, I feel quite good that that's going to work the way that it's intended.

Our next question is from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.

Thank you. Last quarter in Pest, you had some safety issues, which had a profitability or negative profitability impact to them. The comments today said that those metrics are getting back in the right direction. So I'm just curious in the first quarter, were there still sort of adverse costs associated with that? And is there any adverse costs still expected in the guidance for the back half?

Yes. There were some, as I mentioned, so last quarter, so it doesn't happen obviously on a calendar basis. But generally, the safety insurance cost are getting behind us. And as I mentioned last time for me, that was mostly a human issue. I knew that it would be kind of short to midterm, but happy that our safety performance has improved dramatically.

In pest elimination, we've installed in most vehicles now, so dash cans that are looking at where the vehicles are going and how is the driver behaving as well. We've reduced dramatically our safety incidents by doing so, so much so that we are leveraging all those best practices for other businesses, all our folks that are on the road as you know. So we have close to 30,000 people on the road so generally. So as unfortunate and sad as it was so for best, I think that we're getting this one under control and at the same time we can leverage all what we've learned across the company. It's going to take time because that's practical work obviously to get them.

So that's moving progressively behind us. At the same time, we are shifting towards best intelligence, which is this remote monitoring of devices, mousetraps for a different word, obviously. That's quite a heavy lift for our team. We've completed one of the major retailers with it as well with very good results with much more pest free environment at a lower cost, which is a really good proposition. But all in, obviously, it's work and it takes time, but there's an impact slightly on growth in our margins.

But generally, I'm really happy with that business, with the leadership team, with the mindset we have on that team. The best days of best elimination are ahead of us. And as you will see, Q2 margins are going to improve quite substantially as I mentioned in my remarks as well at the beginning. So overall, a very good story that keeps getting better.

Thank you. Our next question is from the line of Patrick Cunningham with Citi. Please proceed with your question.

Hi, good afternoon. Very helpful disclosure on the digital sales. You mentioned an accelerating growth rate throughout the year and over the coming years. What sort of growth rates and margin accretion are you anticipating? And can you unpack this anticipated growth between software subscriptions versus hardware sales?

Yes. So a few questions, Patrick, in your question here. So we're going to learn together, obviously, as we keep reporting on that. So we're not disclosing margin of that yet because we need to do it the right way. There's a lot of accounting practices that we need to get right.

Obviously, for that, we're going to get there as soon as we're ready to do it. So but as you can imagine, it's very high because you have almost no, obviously, materials related to it since it's all digital. To your question on hardware versus software, hardware needs to be installed because it's AI dish machines, it's a pest intelligence devices, it's three d trays are and so on. So that grows nicely, but at the much lower growth rate than software, which is as it's called software. So we don't need to install anything except on a computer, getting the right connection and monetizing the subscription as we progress.

So as you know, most of what we do in digital today, well, has been done for a few years or many years for free. And as we upgrade technology, software, and conceptions models as well, so we charge slightly for it well to do it in a smart way for our customers, always driven by generating more value than what we're charging. That's the eROI approach from the company. But when you think about it, we have a hundred thousand devices that are connected today. We have over a million customer locations with a lot of devices that we could connect in each of them, and most of them are not being monetized, which is what drives me towards clearly knowing that we will be building a multibillion business through Ecolab Digital.

We're in the early innings of that journey. So the fact that we have over 300,000,000 already growing double digit and accelerating in the quarters to come as well, which showing a little bit the potential of that growth opportunity that we have here, which I think is going to be significant in the midterm.

Our next question is from the line of Chris Parkinson with Wolfe Research. Please proceed with your question.

Afternoon. Chris, you hit on a few of your kind of your growth engines, but when you cross over pest elimination, light water with data center, as well as kind of the green shoots for the recovery in life sciences and biopharma. You know, in intermediate term, what are you the most enthusiastic about? And are there any of those three that you, you know, think you're going to further evolve your go to market strategy to further solidify yourself as kind of the go to in any of those substrates? Thank you.

Thanks, Chris. I love and hate that question because you're asking me, so which kid I love the most? That's a bit of a hard one. They're all very well positioned. But if I have to pick one, it would be data centers cooling where we have not only a huge opportunity, but the right to win as well here.

We have cooling expertise that no one else has. We have fluids monitoring capabilities that no one else has as well at the same time. So we're bringing the three components of data center cooling so nicely together between cooling tower, CDUs or coolant distribution units, and we're producing those as we speak. And third, the access to the chip as well while you monitor through three d trace of the overall data center. So when I look at the number of data centers we have out there, the growth of data center construction as well the fact that ships used to be changed every three years.

Now it's getting closer to every six months, especially if they are direct to cheap crude as well at the same time. Well, there's a lot of work and there's a lot of operating service that we need to provide as well. I love that business, the way we're building it with the tech, high-tech companies as well at the same time. Early on that journey, but in a great position. We're growing really fast, great margin, and it's going to be really big going forward.

The next question comes from the line of Shlomo Rosenbaum with Stifel. Please proceed with your question.

Hi, thank you very much. Just Christophe, can you talk a little bit about Pest and where you when you expect it to get, growth to accelerate back to what we've been seeing kind of the upper single digit range? You talked about the margin getting better next quarter, but I want to ask a little bit about the revenue growth. And then those are two parter, you just wanted one, but you mentioned something about AgenTek AI and using that. If you don't mind expanding on exactly where you're using that within the company?

Thank you, Shomo. I'm going to pass the second question on AgenTek to Scott who is becoming an expert in that area by the day. Maybe first on pest elimination. The first, we we're growing 5%, which is kind of a good problem to have to your point. So we want to see that business get back to the high single type of growth pattern as well.

I feel really good in getting towards that probably sometime during the second half of the year and certainly so in 2026 and beyond because we are building so the most advanced best elimination platform that's out there. We have all the capabilities, all the cloud platform, all the AI capabilities. We have 1,500 people, so that are working on digital technology in our company, while it's hard to beat, obviously, so in our industry. So not where exactly I'd like to be. So with the 5% today, the team doesn't like it either.

But we know why we dare. It's because of all the transformation work that we're doing. But we know as well at the same time that, that transformation work well is going to pay dividends going forward. So getting at the higher growth rate sometime in the second half of the year, I would say, is a good expectation. Maybe, on Agenix on what you're going add.

Yes. Absolutely, Shlomo. Yeah. As Christophe said, we're using the AgenTek solutions, developing those in One Ecolab. But starting with building a foundation that we'll be able to use across the enterprise, but within One Ecolab because it's very focused on the customers and the field, that's the processes that we're starting with, the processes close to the to the customers and closest to the sales team.

So think lead the cash processes and looking that at those initial use cases. And as we build those, we'll be able to build off into other end to end processes.

Our next question comes from the line of John Roberts with Mizuho. Please proceed with your question.

Thank you. Your your dispensing equipment, whether it's a dishwasher or a three d tracer machine, is bundled into your pricing. Is the surcharge primarily around covering the costs related to the dispensing equipment?

No. John, that's one component because some of it comes, from China. But we have also chemistry, that that's coming from China. We have packaging, that's sometimes coming from, China. So it's it's pretty broad based.

But as mentioned, John, we're talking about 100,000,000 that we're importing from China. So for a 16,000,000,000 company, it's not exactly huge. But when you add 145% surcharge tariff on that, obviously, so you get too many from the number. And then you have everybody else, that is localizing sourcing of everything they buy in The US right now, which is driving, purchasing cost up as well, which is a derivative from what's happening between US and China. And that's across the board.

It's not just an equipment and dispensing technology. But we're talking about manageable numbers here, which is why I feel pretty good about how we can mitigate that and to do that in a way that's good for customers as well.

Our next question is from the line of Steve Byrne with Bank of America. Please proceed with your question. Mr. Byrne, you're live for question.

Sorry about that. Just another another, couple questions on the the surcharge. Is the is there any particular linkage in this? You know, like, you know, it's not natural gas or, like, your your prior one. Is this is there is there the potential that it could be reversed if there was some resolution in in tariffs?

And or do you think you could convert this into more of a structural price increase rather quickly? And and just one more comment, Christophe, you mentioned, you know, that you you demonstrate value in your price increases. Do you do you have to generate or demonstrate an incremental 5% value to your customers associated with the surcharge?

Yes. So Steve, a few elements to unpack your question here. So first on the value piece, this is what we call total value delivered, which we document and align and agree with customers. We've done that for years. So this is a very well practiced process on how much we help them save in operating costs, in product improvements and in environmental impact as well.

And in many cases, we even measure that on a real time basis through connected chemistry to the Ecolab three d cloud. So this is something we know extremely well how to do. And we sit together with customer when we look at a price increase like the trade surcharge, 5% is nominal. It's not the big number and usually we're between 1% to 3% of their total cost as well in their operation. So we're talking about fairly small numbers for the customers, but still we take it very seriously and we wanna make sure that for the customer, it's a it's a win win.

So practice that we know very well how to do. The the second on a carries going away. Well, I'm not gonna make personal comments on that, but I don't think that it's gonna disappear. The 10% of baseline is here to stay. We haven't heard what's happening as well with Europe, especially in other countries as well around the world.

Well, it's going to be zero. We know that as well. And as mentioned before, so the tariff from China is on kind of almost every product coming from there with a few exceptions, but for us it's mostly all products. And the onslaught impact of people on shoring in The U. S.

Is pretty broad based as well at the same time. So it's kind of an overall tide. It's not individual raw materials or packaging or equipment out there. In a way, it makes it easier to manage than just a few as well here because at the end of the day, well, we can mitigate that with a nominal surcharge as as we're gonna do so on May 1. And the last part of your question, shifting trade surcharge into a structural price.

That's exactly what we did with the energy surcharge, which was much higher, as mentioned earlier as well. So a few years back, we know how to do it. We've demonstrated we can do it. We've had as well relationship with customers while we did it as well. So our approach is to make sure it ends up in structural price as quickly as we can, but this is not the perfect time.

It depends on the customer, the industry, the situation, but that's the ultimate goal.

The next question is from the line of Mike Harrison with Seaport Research. Please proceed with your question.

Ecolab (ECL) Q1 2025 Earnings Call Transcript

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