Ecolab Broadens Asia-Pacific Reach - Analyst Blog

Leading cleaning and sanitation products company Ecolab Inc. (ECL) has agreed to acquire Australian cleaning and hygiene products maker Cleantec for an undisclosed price. The acquisition is subject to the approval of the Australian anti-trust authorities and other closing conditions.

Cleantec, a unit of Brisbane-based diversified industrial services company Campbell Brothers Ltd, develops and markets cleaning and hygiene products primarily to the food and beverage, hospitality and textile care markets in Australia. The entity has annual sales of roughly $55 million.

The deal enables Ecolab to broaden its foothold in the lucrative Australian market and strengthens the Minneapolis-based company's Asia-pacific operation. Besides boosting its customer base, Cleantec acquisition will reinforce Ecolab's food and beverage and textile care businesses while expanding the market for its water care and pest elimination solutions.

Ecolab caters products and services for the hospitality, foodservice, institutional and industrial markets. It leads in cleaning, sanitizing, pest elimination and food safety solutions with revenues of $6 billion. Strong performances across Ecolab's Asia-Pacific and Latin American businesses drove revenues and profit in the last quarter. Its Asia-Pacific sales are benefiting from new account wins, product launches and economic growth.

To drive growth, Ecolab continues to invest in strategic areas such as product innovation, healthcare, water and energy and global pest elimination while rationalizing operating costs. The company remains focused on bringing new technologies aimed at reducing food safety risks.

Ecolab recently acquired the commercial laundry business of Illinois-based privately-held Dober Chemical Corporation. The acquisition boosts its North American commercial laundry business and expands operational scale.

The food services market, one of Ecolabs' mainstays, is recovering slowly across the U.S. and Europe. The company is expected to benefit from the recent uptick in hotel lodging demand and favorable market trends across food and beverage and healthcare segments.

While Ecolab's overseas presence remains strong, its international sales are susceptible to foreign exchange headwinds. Also, raw material price fluctuations may weigh on its operating results for the remainder of fiscal 2010. Currently, we have a Neutral rating on the stock, which is supported by a Zacks #3 Rank (Hold).