minnesota chamber business conference & annual meeting, keynote speaker, doug baker, chairman...
DESCRIPTION
Doug Baker, prominent chairman and CEO of Ecolab, shares the story of Ecolab and a provides a formula for Minnesota to achieve a successful environment for Businesses to thrive.TRANSCRIPT
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1
Minnesota Chamber
of Commerce
Annual Meeting
DOUG BAKER,
CHAIRMAN AND CEO
October 3, 2013
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What I’d Like to do Today
Introduce you to Ecolab
Share how we look at our business
Look at Minnesota through our lens
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Ecolab By the Numbers 3
ASSOCIATES
SERVING CUSTOMERS IN
171 COUNTRIES
$30 Billion
Market Cap 6,300 Patents
$13 BILLION ANNUAL SALES
44,000 1.3 MILLION
CUSTOMERS
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90 Years Young 4
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Ecolab Timeline 5
1923: Ecolab Founded
1935: Service Tradition Begins
1957: Ecolab Goes Public
1987: Ecolab Leaves
Consumer Market
1991: Ecolab forms
Strategic Alliance with
Henkel KGaA
2011-2013: Ecolab Acquires Nalco
and Champion
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Macro Trends
Aging Population
Water Shortage
Energy Demand
Nature
Increasing middle
class globally
Technology
Aging population in EMEA, Japan, and China will drive
healthcare
Meal prep away from home continues in emerging markets
driving foodservice growth
Food production accounts for nearly 75% of water consumption
Demand for energy requires more geographically and technically
challenging sources, which are more difficult to reach and treat
as well as more water intensive
Water scarcity is expected to be a dominant issue, particularly in
high growth emerging market economies
Evolution presents new food safety and infection challenges
Science & technology enables broader set of product and
process improvements
Population Growth
Diet Shifts
More people: +50% by 2050. Most growth in emerging markets
Diets move from grains to proteins in emerging markets
Population growth plus diet shift means 75-100% more calories
needed to feed the world
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Ecolab: Uniquely Positioned To Deliver
What Matters Most…
CLEAN
WATER
SAFE
FOOD
ABUNDANT
ENERGY
HEALTHY
ENVIRONMENTS
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Ecolab Model Drives Value
8
Shared Operating Principles
Shared Model
Shared Technology
Foodservice/ Hospitality
Food & Beverage Processing
Healthcare/ Infection
Prevention
Industrial Water Services
Energy Services
>90% Product Sales, >90% Recurring Revenue
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Ecolab Business Model
INDUSTRY LEADER IN PRODUCT INNOVATION AND
SERVICE EXPERTISE
Ecolab’s core capabilities that drive value:
Service Technology Training Information
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Innovation Leader
Major R&D investment
Anchor Technologies Drive Customer Decisions
Food Safety
Infection Prevention
Energy
Water Sustainability
Cost Savings and Sustainability
BEST IN CLASS SOLUTIONS FOR
CUSTOMER NEEDS
10
$0
$200
$400
$600
$800
$1,000
2008 2009 2010 2011 2012 2013
New/Modified Products As % Of Total Sales >30% Each Year
Innovation Pipeline (Estimated 5th year new product sales)
*
*excludes Champion
($mlns)
Apex 2
Low Temperature Corrosion Inhibitors
Encor for Operating Room
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Leverage 3DTRASAR Technology
Extend Solids Franchise
New Antimicrobial Solutions
Innovation Drives Margin &
Competitive Advantage
11
enVision
2013: CROSS-FERTILIZE ECOLAB, NALCO AND
CHAMPION TECHNOLOGIES
3D TRASAR
Apex 2
Solids for
Cooling Water
Aquanomic
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Ultimate Competitive Advantage
12,000
15,000
18,000
21,000
24,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
“Ecolab is among the top ten best U.S.
manufacturing companies to sell for.” Selling Power Magazine
INDUSTRY-LEADING SALES AND SERVICE FORCE
25,000 Field Associates
Experience That Matters
30% > 10 years
40% > 8 years
SALES AND SERVICE FORCE Combined Ecolab and Nalco
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Balanced Business,
Big Opportunity
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34%
17%22%
27%
48%
26%
13%
8%
5%
31%
27%
6%
36%
14
Balanced Business
Sales by Region Sales by Segment
Asia Pacific
Canada
US
EMEA
Latin America
Abundant
Energy Safe Food
Healthier
Environments Clean Water
Institutional
Industrial
Energy
Other
Sales by Strategy
Ecolab Pro Forma 2012
Sales $13B
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$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Strong Competitive Position
ECOLAB SHARE $13 BILLION
Ecolab Others
$100 BILLION
MARKET
13%
15
($ mlns.)
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Major Opportunities in Existing Markets ESTIMATES BY MARKET
Ecolab Sales Remaining Market
$ MILLIONS
SEGMENT
$0 $5,000 $10,000 $15,000 $20,000
Janitorial
Food Retail
Ed./Government
Other
Lodging
Light Industry
Health Care
Paper
Heavy Industry/Mining
Food & Beverage
Energy
Food Service
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Proven Strategy
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Outstanding Global Customer Relationships
Customers % of Sales Largest <2%
Top 10 <10%
1,000,000+ CUSTOMERS
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Proven Effective Strategy CIRCLE THE CUSTOMER - CIRCLE THE GLOBE
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Provide
customers
improved control
over results, costs
and quality
Leverage
strong Ecolab
relationships to
drive improved
growth
Increasing
the solutions and
services to better
meet our customers’
global needs
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Strong Culture
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Culture
Service
We win when customers win
We get things done
Caring
Ida C. Koran Foundation
Community: internal, external
Performance
Strive to be the best
Aggressive objectives
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$0
$500
$1,000
$1,500
$2,000
$2,500
2008 2009 2010 2011 2012
Financial Objectives
Growth
15% EPS growth
Returns
Improve ROIC 100 bp per year
Leverage
Return to A range metrics by year-end 2015
Total debt-to-capital ratio in the 35% - 40% range
< 2.0x total debt/EBITDA
22
$1.50
$2.00
$2.50
$3.00
2008 2009 2010 2011 2012
STRONG GROWTH, PRUDENT FINANCIAL MANAGEMENT
EPS (adjusted)
EBITDA (adjusted, $ - mlns)
2012 EPS and adjusted EBITDA data reflect Nalco merger
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History of Performance
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$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Strong, Consistent Growth
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2012 Sales and EPS data include Nalco merger
EPS CAGR
Adjusted EPS
Ecolab S&P 500 (Operating Earnings)
13% 12%
8%
4%
0%
5%
10%
15%
10 year 5 year
SALES
($ mlns.)
EPS (adjusted)
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Delivering on Expectations
Forecast Actual
PREDICTABLE QUARTERLY EPS
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
ACTUAL > ECOLAB FORECAST
85 OF 86 QUARTERS (EXCEPTION = 3Q 2001)
25
Adjusted EPS.
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Performance that Outperforms the S&P 500 ECOLAB COMMON STOCK VS. S&P 500 SINCE
52 Years: Total Return Through 12/31/2012, Including Dividends
Cumulative Return: 201,484%
vs. S&P 500: 189,142%
-
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
ECL S&P 500
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Financial Formula
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Ecolab Success Formula 28
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Minnesota by the Numbers 30
5.1%
$38.4 Billion Biennial Budget
(2014-2015) $253 Billion
GDP
3.5%
GDP Growth (2012)
Unemployment
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Minnesota by the Numbers
Education
#2 high school graduates
#1 ACT Scores
#11 bachelor’s degree or higher
Health
#1 Least stressful metro
#1 Health care system
#3 Most people with health insurance
#5 Healthiest state
Economics
#3 Labor force participation
#9 Invention patents (2008-2012)
#2 Fortune 500 per capita
#13 GDP per capita
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Minnesota by the Numbers
Generosity
#1 Philanthropy per capita
#1 Volunteering (Twin Cities)
#1 Most civically engaged metro
#3 United Way campaign (Twin Cities)
Quality of Life
#3 Quality of Life
#5 Standard of living
Lifestyle
#1 Most “playful” metro
#1 Golfers per capita
#1 Bike-friendly metro
#1 Metro for health and fitness
#2 Theater seats per capita
#7 “Most happening” rock scene
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Minnesota by the Numbers
#1 Business-to-Business Tax on warehouse
and storage services
#3 Corporate Tax Rate
#4 Personal Income tax top rate
#5 Business property tax rate (commercial business
property in Minneapolis over $1 million)
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Minnesota by the Numbers
#46 for new business startups
#45 for business tax climate
#42 in highway rankings
#39 in attracting young talent to the metro
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Growing Spending Imbalance
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24
29
$10
$15
$20
$25
$30
2010 2015 2020 2025
Revenue Growth @ 3% Spending Growth @ 4.7% 5%
3%
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Minnesota by the Numbers 36
#50 Hispanic students graduation rate (51%)
#49 Black students graduation rate (49%)
#49 Asian/Pacific students graduation rate (72%)
#48 Low-income students graduation rate (58%)
#29 White students graduation rate (84%)
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Minnesota Success Formula 37
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Minnesota Success Formula 38
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Minnesota Strategies 39
World-class talent
Great infrastructure / amenities
Sustainable growth culture
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Minnesota Priorities
1. Tackle educational challenges – must remain #1
2. Invest in infrastructure for the future
3. Restructure Health & Human Services, bend the curve
4. Rebalance the tax code:
Broaden consumer sales tax
Reduce income tax
Clean up business taxes – don’t punish those who HQ here
5. Change the conversation…growth, responsibility and unity
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“The future destiny of Minnesota is to be
a glorious one.” Girart Hewitt, St. Paul Attorney
and Author, Minnesota: Its Advantages to Settlers,1868
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42 42
Cleaner Safer Healthier