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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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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.

Q2 2026

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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's Second Quarter twenty twenty five Earnings Release Conference Call. At this time, all participants are in a 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. Andy, you may now begin the presentation.

Thank you, and hello, everyone, and welcome to Ecolab's second 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 statement 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 our posted materials. We also refer you to the supplemental diluted earnings per share information in the release. With that, I'd like to call turn the call over to Christophe Beck for his comments.

Thank you so much, Andy, and welcome to everyone joining us today. The Ecolab team delivered another very strong quarter, once again, very consistent with our guidance. Our team's relentless focus on execution and delivering exceptional value to customers enabled us to achieve double digit earnings growth despite the unpredictable global operating environment. Organic sales continued to grow 3%, led by strong value pricing, solid momentum in our core business driven by our One Ecolab strategy that's working really well and fueled by breakthrough innovation as well as steady strong performance from our growth engines. This good momentum more than overcame uneven end market demand, particularly in our Paper and Basic Industries businesses, which represent only 15% of Ecolab's total sales.

In other words, the remaining 85% of our business grew organic sales 4% and operating income by 18%, reflecting our broad and resilient business portfolio. This is a major strength of Ecolab, allowing us to deliver superior performance in good like in more challenging times. Now let me spend a few minutes on our key growth drivers and talk about why I remain very confident about our future in 2025, in 2026 and beyond. First, on value price. It continued to build in the second quarter increasing 2%.

This growth is supported by increasing value that our technologies and services bring to customers as we had to deliver best in class business outcomes, operational performance and environmental impact. During the second quarter, we also began implementing our trade surcharge for all customers in The United States only. Given the dynamic international trade environment, the surcharge coupled with the expertise of our world class supply chain team enables us to reliably supply our customers while delivering value that exceeds the total price increases. With this now in place, we expect our total pricing to strengthen closer to 3% in the third the fourth quarters. Next, the growth in our core segments like Institutional and Specialty and Global Water.

Well, both continue to progress very well. In Institutional and Specialty, we continue to drive robust share gains, allowing us to continue to outperform the industry while overcoming the headwind created by the strategic decision to exit a few non core, low margin business. These exits, which are mostly in our hospitals and retail businesses, are causing a one to two percentage point drag on Institutional and Specialty second quarter growth. But they're also helping us to further enhance our focus on the most critical customers and at the same time to further improve our long term margin profile. So all in all, a very good story.

In Global Water, performance was led by Food and Beverage, which accelerated to 3% organic growth by executing very well on our Wanicola growth strategy that provides customers with a comprehensive hygiene and water offering that actually no one else can truly provide. This strength more than offset the softer performance in more difficult end markets in Paper and Basic Industries as mentioned before. Excluding these businesses, Global Water sales growth accelerated to 4% and operating income grew double digits. Finally, growth engines, which include Pest Elimination, Life Sciences, Global Hi Tech and Ecolab Digital continue to perform exceptionally well. Collectively, these businesses make up nearly EUR 3,000,000,000 of Ecolab's annual sales and grew double digits in the second quarter.

Pest Elimination's organic sales growth accelerated to six percent, benefiting from our Juan Nicolas growth strategy and also the shift to our digital Pest Intelligence model. As expected, operating income margins increased sequentially to nearly 20%. And as we continue to deploy best intelligence in the next coming years by leveraging our major digital capabilities, we expect to generate steady strong sales growth and very attractive operating income margin expansion. Life Sciences grew mid single digits, led by strong double digit growth in biopharma as well as in core Pharma and Personal Care, while performance in Water Purification was partially impacted by shorter term limitations in production and we are at full capacity. Also, OI grew significantly benefiting from the strong growth in our high margin biopharma business.

We expect reported OI margins to stay in the mid teens as we invest further to fill this long term high growth business with OI margin potential of 30. Also, our global Hi Tech business continues to grow very rapidly with sales up over 30% and operating income margins exceeding 20%. We're just at the beginning of this incredible growth story, but this is one we will own by leveraging our vast expertise in cooling for data centers and water circularity solutions for microelectronics production. And finally, Ecolab Digital kept accelerating sales growth to nearly 30% in the second quarter, reaching an annualized run rate of €380,000,000 driven by rapid growth in subscription revenue and digital hardware. This exceptional performance combined with value price and share gains across the businesses drove 170 basis points increase in Ecolab's second quarter operating income margin.

While commodity costs anticipated to keep increasing by low to mid single digits in the second half of the year and into 2026, we expect our operating income margin to continue to expand at steady levels due to growth in high margin businesses, value price, share gains and productivity improvements. In total, we continue to expect our full year 2025 operating income margin to reach a solid 18% on our path to deliver a 20% OI margin by 2027. And as mentioned, we will not stop there. Looking ahead, most business fundamentals seem to be trending up, which provides me with the confidence to deliver 12% to 15% adjusted EPS growth for the quarters to come in 2025 and into 2026, as we also keep investing in our growth engines. Our experience in navigating past macro challenges has only strengthened our capabilities and agility.

With our diversified portfolio, record innovation pipeline, strong growth engines and focused execution with plenty of options and levers to deliver on our commitments in almost any environment. Our unique ability to provide innovative solutions that drive best in class outcomes, enhance operational performance and conserve vital resources like water and energy for all our customers is crucial or more crucial than ever. With a strong and resilient free cash flow and extremely strong balance sheet and a super low leverage ratio of 1.7, we're very well positioned to capitalize on both organic and inorganic growth opportunity. These strong foundations enhance our ability to create significant value for our customers and drive attractive returns for our shareholders. I therefore remain very confident in our ability to deliver sustained strong performance in 2025 and beyond.

So thanks again for your continued trust and your investment in Ecolab. I look forward to your questions.

Thanks, Christophe. That concludes our formal remarks. One final note before we begin Q and A. As a reminder, we'll be hosting our Investor Day on September 4 in Minnesota where Ecolab's senior leadership team will provide an in-depth review of the company's strategy to drive strong growth and attractive margin expansion. This event will also include interactive sessions showcasing Ecolab's latest breakthrough innovations.

Please contact me if you're interested in joining us. With that, operator, would you please begin the question and answer period?

Thank you. Please proceed with your question.

Yes. So for my question, I wanted to ask, you know, I think some folks were were thinking maybe that you would raise your your guide or or maybe the the low end of the guide a little bit this quarter. So even though the second quarter came in line with expectations, I think some folks are maybe expecting a little bit more for the second half of this year. Can you just walk us through the puts and takes here? Is there maybe some conservatism being baked in here?

Or is there maybe something else that I'm not seeing? Thank you.

Thank you, Tim. It's actually a combination of both conservatism and at the same time investing further in our growth businesses. 13% growth on earnings for the second quarter, guiding this 12% to 15% for the second half and beyond. For me, this is the commitment I've made to all of you guys, and this is where I want to make sure that at least I deliver that. Actually, well, really like where we are right now.

So we have good momentum with, as mentioned, 85% of our business growing 4%. And the growth engines, the one I mentioned before, that represent close to €3,000,000,000 in sales, while they're growing double digit. So our investments in growth are really working. Second, the macro trends around water for AI infrastructure, purification for life sciences and productivity for hospitality and pest intelligence, while they're all trending in our favor, it's a good thing. And our business fundamentals of new business, innovation, value price, productivity, they're all trending in a positive direction.

So I'm with you. I feel good about where we are, where we're going about the second half and for 2026 and beyond. But as we know, the world is a bit of a complicated place. And we honestly always build some room for the unexpected in the last few years while we had plenty of this. And some could call it conservatism.

For me, it's making sure I can deliver what we've promised. And secondly, we keep investing more in our growth engines to fuel this long term momentum in Life Science, in Data Centers, in Fabs, in Pest Intelligence, in Nicolab, digital. And ultimately, this will keep paying dividends in the long run for all of us. So bottom line, I think we're in a very good place. And any over delivery that we will get in the quarters to come and years to come will be shared between returns for incremental returns for investors and incremental investments in our growth businesses.

So all in all, I think it's a win win for the company and for investors as well at the same time. For me, as I've mentioned, this 12% to 15 is not an ambition. It's a commitment and anything that comes above will be a combination of returns and investment in our growth businesses.

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

Thank you. Christophe, I just wanted to touch on pricing. I understand from a volume perspective, obviously, as you mentioned, there was an uncertain pace, etcetera. Just can you help us dig through what you're hearing, what you're seeing on the pricing front? I think the 2%, I believe, was supposed to be 2.5% to maybe a bit higher.

If you could just talk about what we should expect in the second half with and without the surcharge pricing that you have coming in?

Yes. Thank you, Manav. I like a lot where we are on pricing. And keeping in mind, it's value pricing. We've made that commitment to customers as well that we will always deliver more value, which means cost savings in the operations than the incremental price they attain for us.

It's kind of a value share. That's the important component of how we think about pricing in our company. So 2% in Q1, 2% in Q2, starting The U. S. Trade surcharge as well in the second quarter.

So far, so good, but it's always a start during the quarter you announced it. So for Q3, Q4, I expect pricing to move closer to to three. So I don't know exactly where we're to land in Q3, but in Q4, it's going to be three. Hopefully, it will be three or close to three as well in Q3, but all trending up. And again, backed by the value delivery for our customers.

And what's most important is that the retention of our customers, which is something that we look at very closely, is getting stronger as well at the same time. And as you've seen, the volume is positive as well, especially strong in our Drals businesses. So all in all, it's working well. And I see value price as a good revenue stream at 100% margin for us and in ways that are driving savings in our customers' operations as well at the same time. So it's working really well.

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

Thanks for taking my question. So just wanted to focus on the Pest Elimination business where we saw an improvement. Can you talk about some of the efforts around Pest Intelligence, how those rollouts are coming together? And how should we think about the puts and takes for growth going forward? Thanks.

Thank you, Ashish. We love that business. Pest elimination is just an unbelievable story, which will shift towards Pest Intelligence over the next few years. It's not going to take forever, but we're going to move from Pest elimination, the business that we have today with our people going and visiting every location and looking at every device at our customers' locations, which are millions around the world to best intelligence, where most of it is going to be done 20 fourseven remotely with our team ultimately. So going to the places where they can add value and not taking devices means mousetraps that are empty.

We are on an unbelievable journey with that. The huge advantage we have is that as Ecolab, well, we have massive capabilities in digital, in sensing technology, the Ecolab three d clouds. We have all it takes to put that into practice in our Pest Elimination business. As I've shared with some of you as well, the last few months, we concluded one of the major retailers here in The U. S, which was our pilot, making sure it was working from a technology perspective, from a model perspective.

And interestingly enough, when we think about the pet free ratio, the industry is up 92% today, which means 92% of the customer locations are pet free. The average for Ecolab is 95%, which is better. You still have 5% of the locations that are not pet free. And that pilot that we deployed is showing that we can deliver 98% trending to 99%. We'd never get to 100% because it's nature obviously, but 99% seems to be the right number.

So great outcome. The model is working. The customer is ready with is open and ready with the financial model as well at the same time. We're moving towards second retailer as we speak. The third one is lined up as well.

So for the months to come and will expand as well across all our end markets in the months and quarters to come. I think that whole business in the next few years is going to become a full test intelligence based model with a new financial model obviously that's driving more growth, better margins and most important 99% Pest Free environment for our customers. So a very good story.

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

Yes. Good morning, Mark. Good afternoon. Thanks for taking my question, Christophe. Can you help us to think about the delivered product cost that you saw in this quarter and how you're thinking about that as you go into the second half?

It seems like there's kind of still a lot of moving parts around tariffs and headwinds around that, raw materials kind of some of them fading, some of them pushing higher. So can you help us to think about those trends?

Yes, John. A lot of moving pieces to say the least. We've been used to that. Let me ask Scott just to start with the answer here.

Yeah, absolutely. Hi, John. Yeah, on DPC, so similar to Q1 and Q2 commodities, so the market, if you will, was up low single digits, which includes the impact of tariff and tariff related inflation, which we're seeing. But the net DPC was slightly favorable as we've gotten efficiencies from our great supply chain team. So we expect the market, the commodity inflation to be up that low single to mid single digits in the quarters to come, ultimately depending on the tariff impact.

But we expect to continue to do better than this with the impact from our supply chain team, which we're seeing in the results of our gross margins being up 100 basis points in Q2.

So the combination of supply chain doing an amazing work to get a net EPC that's favorable and value price that's trending positively as well is obviously driving a very positive equation for our margins, which is one of the reasons why our gross margins went up 100 basis points, okay, in Q2.

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

Good afternoon. Christophe, on The U. S. Surcharge, do you still expect to realize roughly half of what you announced? And are you seeing competitor support for this surcharge?

And lastly, why not anything on the international side in terms of the surcharge? Thank you.

So a few questions in there, David. So first on competitors, they've announced a trade surcharge. I'm not in their books obviously, so I don't exactly know what they're doing. The good thing is that we're gaining share again all of them, which is a good place to be. So good that they're all participating and that we're winning as well at the same time.

The second, in terms of delivery, it's an imperfect science as we know, but generally working as you've heard. So from Scott, when we look at tariffs, increase of prices by local manufacturing concentration, our optimization in supply chain plus the trade surcharge, it's a net positive and you see it in our margins ultimately. So the mechanics work really well for us and for our customers, which is exactly where we want to be. And the third part of your question, international, we have all it takes to get it done. It's just that today, as you know, those trade deals with the economies around the world were all unilateral.

So it's a tariff you get when you import or you export to The U. S, not when The U. S. Is exporting, so to other markets. At least we haven't seen those.

The moment we see those, if there is a reciprocal action, so from any market out there, we have the mechanics, We know how to make it work. We've used it with energy surcharge in 2022. We can use it. So far, we don't have any reasons to do it. So we will not obviously use it as long as the tariffs remain as they are to export to other countries.

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

Great. Thank you. Christophe, despite a pretty sluggish macro environment, your margins in Institutional Life Sciences seem to be moving in the right direction. And on one hand, you've been talking about price, presumably productivity and portfolio rationalizations on the positives versus presumably a still pretty sluggish macro and perhaps a little bit of gross spend on the opposite side of it. But just in the context of the macro we're in, what did 2Q results tell you about your longer term opportunities by segment? Thank you.

Great question, Chris. Well, what it's telling me is that it's working because INS has reached the highest level of margin they've never had in their history. This team is doing unbelievable work by really focusing on what customers need the most. And it's labor automation, labor optimization, whatever the words are. They have a hard time to get talent and the talent they're getting is at a higher cost, which is a good thing for the general environment, but not so much for the P and L of our customers.

So when I look at automation solutions for our INS customers, it works for them. It helps them reduce their cost in dramatic ways, which means that we can get some of that value share in our value price. So that's good for us, good for them. Same time, we're also leveraging technology within INS, really pleased with way I and S is embracing digital technology, one Ecolab platform that we've developed for the whole company, for the whole I and S as well at the same time. So we get an improvement as well at the same time from an operating performance perspective, which is really good.

And the third thing is that because of that better service, better outcome, better productivity for our customers, we gain share as well at the same time. And you see the growth of INS is really good. It's even been impacted one to two points by those exits, as I mentioned before, which were private label businesses, which didn't have much to do with our service business by the way. Well, we're gaining share. And that's showing that it's working, customers like it.

So the combination of all three gaining share, driving value for our customers and driving operational performance within I and S, net to the highest margin in our history in INS and it's going to continue on that good trajectory so for the quarters and years to come.

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

Thank you and good afternoon everyone. Wondering Christophe, if you could speak a little bit to I believe in your prepared remarks and please correct me if I'm wrong, you mentioned that you're maxed out on capacity in certain parts of the water business. So I'm just wondering if you could expand on that a little bit. And likewise, in past, it sounds like these customer trials are going extremely well. So I'm wondering sort of what the S curve of the implementation of that new technology, your better mousetrap, so to speak, What the timing and pace of that's going to be?

And if there are any potential capacity constraints there that you would need to get in front of?

Yes. So two different businesses. Obviously, it's our best intelligence with better mousetraps, which are truly better mousetraps. It feels easier to do than it truly is to get that working really, really well millions of times around the world where we operate with best elimination and in the future, so best intelligence. We wanted to make sure it was working before we go too far getting ahead of our SKUs and not delivering the value to our customers would not be the right thing to do.

Obviously, it's having one of those great retail partners, which is a reference point in The U. S. Was exactly what we wanted to do and it worked. And now we're getting second, and as mentioned, the third one as well. I think it's going to take a few years.

It's going to take less than five years, hopefully much less, but let's see to shift the whole business towards best intelligence. We have a great team with a great leadership and customers that really love what's being done. At the same time, we have digital capabilities that none of our competitors do have. So that should be all positive, obviously, so for us. In Life Science, you're right, Nick.

So we got some capacity limitations in our Water business. So within Life Science, Water Purification, the Life Science business, but not for the Pharma business directly. Pharma, BioPharma, as mentioned, is growing double digit, very strong, very good. Really pleased to see that all the work that we've done over the past two, three years since we acquired Pure Light, ultimately it's paying off and really looking some really good momentum and most importantly great acceptance by our customers. And in the second quarter, we had maintenance that was planned in one of our plants in Europe that limited how much we could produce there and that had a slight impact on our production over there.

That plan, that's okay. We need to live with it. That's not much to do with demand, obviously, so kind of business as usual.

The next question comes from the line of Patrick Cunningham with Citi. Please proceed with your question.

Hi, good afternoon. Thanks for taking my question. Maybe just a related follow-up there on Water. I think that operating income growth was rather modest relative to solid pricing growth and good underlying growth there. I think you cited supply chain costs and unfavorable mix, but I think our assumption was some of these faster growing markets had better mix. So what was the source of that unfavorable mix?

Scott, do you want to answer that question?

Yes. Happy to do it, Patrick. As Christophe noted in his opening, Basic and Paper have been a drag and and that Water OI growth of 6% was all due to Basic and Paper. If you look at the Water OI growth excluding both Basic and Paper, the sales were up 4% and the OI was up strong double digits.

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

Hi. Thank you very much. If you don't mind, I'm going to ask a little bit more of a two parter. First one is just on the organic growth. If we're kind of bouncing around at 3% and volume is only kind of 1% here, are you still do you still have the same level of confidence on that operating margin target, especially if we don't start to see a material improvement in the volume side? And then just wanted to touch on what you said on Pest in terms of morphing the model, because we've had a couple of quarters of growth that were lower than what we're used to seeing in that business. Is part of the shifting the model giving you a near term headwind to revenue growth in that business? Thank you.

Thank you, Slomo. Yes, two very different questions. So on Pest Elimination, short answer is yes. The shift towards best intelligence is not an obvious shift. It's a pretty significant shift within our organization.

It's new technology. It's a new route model. It's a new financial model. It's a complicated piece, if I may say so to make it work really well. And on top of it, as you know, we had a few incidents that we had to deal with, unfortunately, well caring about our team That's so important for us in the company.

So it was kind of behind us. Now we keep investing on best intelligence because it's going to help us really lead that transformation in that industry, in The U. S. And around the world, not just in terms of amount of devices, but in terms of type of technology and business model as well at the same time. So it requires some investments, financial investments, but resources as well at the same time, which are people, obviously.

So doing that work generally feels good with the trajectory we have on the top line in terms of model as well. So the 20% plus is going to just strengthen with that shift in model in best intelligence. So generally, a very good story. Those transformations are never obvious and it's not a straight line to heaven either, but great leadership team, great team executing very well. And as mentioned before, so customers very pleased with how it's working because at the end of the day, well, it's aiming to the 99% best free environment that matters.

Now to the first part of your question. My confidence to get to 20% by 27% just keeps getting stronger. If we look at the second quarter, well, with top line growth of 3% being able to deliver 13% earnings growth and operating income margin up 170 basis points. Obviously, it's kind of a demonstration of what accelerated growth could mean as well so for the delivery of the company. And as mentioned, so we have two businesses and there will always be a few businesses that are not exactly in a great place.

That's the strength of the portfolio we have as a company here. So these paper and basic industries, well, 85% of the company is growing 420% of our growth engines are growing double digits as well at the same time and that's where we invest. So generally, the mix of growth is going to turn positive and that's going to help us get closer to the 20% quicker as well at the same time. So I can't judge what's going to happen in the outside environment. But generally, I feel really good about 20 by 2027.

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

Thank you. With the balance sheet now in great shape, how would you characterize the pipeline for inorganic growth? It's been a while since the Pure Light deal.

It's been a while 2021. We did Pure Light. We did a few smaller acquisitions in the meantime, which is the bread and butter of our M and A engine by the way. And sometimes we have a few bigger ones. And you're right, we have great cash flow, great cash flow conversion, very low leverage ratio and it's going to keep getting lower obviously as time passes by.

It's putting us in a great position to invest where it makes more sense. And John, we're going to keep investing as we've always done. It's first in dividends, it's in our business and we have plenty of opportunities. We talked about innovations on this call. It's on our customers' technology as well in dispensing, in dish machines, in equipment and so on as we've always done.

And then there is the M and A. I really like the pipeline that we have. Very focused on the three areas that have been priorities for me. Water and especially on the high-tech side, data centers and microelectronics, so perhaps in other words, in life science and in digital technology. So really like the pipeline we have, the capabilities we have at the same time, but we will always remain disciplined as well in terms of how we deploy our capital.

So if we find the right things, and as mentioned, there are a lot of right good things out there for us, we will move and we'll let you know obviously. And as a lot of priority will always be buybacks as we've done in the past few years and as we're doing as well in 2025 at the same time. So I don't think we could be in a better position right now. So we have a great machine generating a lot of cash, a fortress balance sheet, great opportunities in front of us and priorities that haven't changed for a very long time.

The next question comes from the line of Jeff Zekauskas with JPMorgan. Please proceed with your question.

Thanks very much. In the Water business, the organic change was 2%. And I think your water business grew, maybe volumes grew 1%. Please correct me if I'm wrong. And your overall price for the company was 2%, but it seems that it was lower in Water.

So is the challenge for the second half to get better pricing in the Water division? And do you need it in paper and in heavy industry where you're contracting a little bit? Is that the challenge for the second half in pricing?

No. I don't think so. Our water business has always been pretty strong at driving value price backed by total value delivered. They've invented actually that concept a long time ago. So they know how to do it.

They've been good at delivering it. At the same time, we make absolutely sure that we get the value price when we truly get as well. So the TVD, the cost savings within our customer operations. So we're not disclosing by segment, as you know, so price and volume, but you're more right than not. So with your assumption on Water, which makes me feel good actually.

And as mentioned before, so Water organic growth ex Paper and Basic Industries, well, would be full. So it's a very good story, as Scott mentioned as well, and the operating income would be up in the mid teens as well at the same time. So a really good story. So for me, Jeff, it's really focusing on what grows best in Water. It's global high-tech, data centers and especially so microelectronics.

These two growing collectively, so 30%, very good. The rest of the business is growing nicely. And we have those two businesses that are not growing, Paper and Basic Industries. But I think that that's going to change at some point. Basic Industries is as you maybe or maybe don't know, it's our steel business, it's our power business and it's our chemicals business are in there.

Well, those ones with what's happening around us with the whole trade negotiations, I think ultimately are going to turn better as well over time. And the paper business is very much related to consumer goods growth as companies grow out there, FMCG of that world. So those ones are going to be okay. It's never going to be a great growth, but it's going to be okay as well. So if I put it all together, 85% is going really well in that Water business, 15% a little bit more challenged.

Margins are really good in the businesses that are growing fast. And our growth businesses keep accelerating, especially in the high-tech sector. So generally Water will be in a good shape.

Thank you. The next question is from the line of Andy Wittmann with Baird. Please proceed with your question.

Great. Good afternoon and thank you for taking my question. I guess I wanted to ask about free cash flow and just try to understand a little bit more about what's happening here. As I look at it on a year over year basis and normalize it for days like the inventory up to a smidge. Receivables are up more than a smidge and payable days are actually extended as well yet year over year the cash flow is down and year to date you're about 65% of your adjusted net income.

I know you target 95%. And so obviously, the second half is going to have to ramp if this year is going to be a 95% year. So I guess, Scott, maybe the question is, do you still expect it to be at 95% year? And maybe what happened in the first half? Or do you see did anything happen that's unusual in the first half that we should know about that maybe has you at or slightly below plan for the year?

Ecolab (ECL) Q2 2025 Earnings Call Transcript

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