ECL
#Thank you, Mike
So, the first quarter was certainly not our prettiest, but better than it looks and it does set us up for the full year delivery
Most things are on track, pricing, new business, innovation, investments, industrial business acceleration, energy recovery and FX stabilization, but we did have a few surprises
Raws moved faster than forecast in the quarter, and we do believe will be net higher for the year
The good news is, our pricing also has traction and we believe will catch up on a dollar basis this year
Institutional sales were also soft
They were softer than expected, but they're better than they look
So, if you take and adjust the base business for Swisher exits, which we have done because of margin and other issues, we're really growing at about 5% in North America and 4% globally
That's still slower than last year and slower than we expected
The issue primarily is that U.S
restaurant same-store consumption is down
(05:14) you got to go sell more business
We're not going to fix the U.S
foodservice market by ourselves and the division is already all over this driving significant new business campaigns, and we've got the right team to do this
In total, Q1 was solid, not brilliant, but leaves us in position to deliver the year
The most important perspective on 2017 to understand is that the second half EPS ramp up is not nearly as steep as it appears
We need to do 14% EPS in the second half to reach our midpoint or $4.80. The first half run rate is really an 11% when you control for hedge and other non-recurring install and other expenses
So, we still have a step-up, but it's much more manageable moving from an 11% to a 14% than what may appear to be from like a 4% or 5% to a 14%
So, the step-up requires sales to move from 2.5% in the first half to 5% in the second half, which I believe is quite doable
Here are couple of facts
Energy trajectory this year, 0% growth really in the first half, we expect them to grow at least at 5% in the second half
If you assume that, then II&O (06:27) needs to go from 3.5% in the first to 4% in the second
We already have Industrial sales trajectory moving, it's accelerating
Institutional in the second half will lap the Swisher exits, and we've got a clearer view of timing on known wins and losses throughout the businesses, all of which are quite favorable to us
Net, we're making progress
We believe we're on track to go deliver a solid year
And so while Q1 won't win many style points, we do believe we're going to deliver a more Ecolab-like performance in 2017. So, with that, I'll turn it back to Mike
Yeah, I think within the Institutional margin, you've got some of the noise I referred to earlier
You certainly have some impact from hedging, not in the U.S
margin particular, but U.S
global or in Institutional global
And you also have investments that have been made, particularly in plant equipment, to enable a new platform for solids, which is now coming online
It's in the margin, but not yet fully or even partially utilized in some cases, as we're rolling that out late in the second quarter
That's also making it a little worse
And then we have a few rollouts, where we've got the mechanical equipment expense or the ME expense in the business, but not the sales yet
So, I would say if you look at Institutional margin, it looks like it's down, but there's a number of things, which really, I think, mask the underlying trend in their margin
And we expect, over the year, that their margin is going to start showing daylight between this year and last year
Pricing in Institutional was the best performer last year, and they're continuing on a very solid track this year
So, we're not really worried, ultimately, in Institutional margins
Well, <UNK>, I mean it really comes down to mostly same store's consumption in U.S
restaurant
And that we've dealt with many times in the past
Restaurants come in and out in terms of how successful they're being
I don't think we're the only ones feeling this
We've tended to manage this better than others
The division got on it early
They have a number of what I would call high-energy new business efforts underway that are gaining traction, and that's the only way you sell through this is you got to go gain more business
We, by ourselves, can't force the restaurants to consume more, and they're really just reflecting the softness in their business
Typically, what we've seen in the past and what we expect this year is, let's call this the very early innings of a recovery
And we typically see really margin recovery and a lot of flow-through more in year two than in year one
And that's simply because as you're starting to see volume increase, you're simultaneously seeing some of the raw materials increase, pricing lags a bit
And so you end up with increasing sales, but not significant and sometimes even near-term decelerating margin before it starts expanding again
You also have some costs you've got to add back
The largest cost this year that we're going to have to add back is compensation
So, it's a business because of performance, it hasn't earned bonus over the last several years
They are on track to earn bonus this year, and so we've got to rebuild that
We're also rebuilding some other comp where it matters because the industry heats up, it becomes much more competitive
In total, for the year, I think we're pretty much where we thought we would be last call, and that is we're going to have some year-on-year sales growth in this business
Really, it's going to be a second half story as I alluded to in my opening remarks
And we also expect to be about even to have some minor potential accretion on the operating income line, too, as we start rebuilding comp and that somewhat offsets the volume benefit that we're going to see
In Specialty, it's more a timing issue, and it's not even just the comp
We've got a lot of new business that's being put on in Specialty right now
They're going to have a very solid year
The quarter is really just sort of an aberration
We've gone through this
As I've always described, that's sort of a – the way they feed their village is through hunting elephants, and they've landed several, but they just haven't brought them back to the village
So, even there you've got some of the pressure as a consequence of they've installed a lot of these accounts, but they haven't yet started consuming our product in the first quarter
They're starting to in the second quarter, as they had to run out the old competitive product first
So, that also put pressure on the first quarter margin
There's going to be a little less pressure from that in the second quarter but still some, and all that pressure goes away in the second half as we realize the full effects of the new business volume in Specialty
I don't think we're going to see dramatic wage inflation in 2018 versus 2017. I mean, it's been fairly steady even over the last couple of years
I mean, many of the markets that we compete in are pretty full employment
And we've got several things going for us
One, we've got a great employment brand story
We've got great track record of growth
We're on the right stuff, stuff that matters to people who are joining the workforce in terms of our ability to talk about clean water, safe food, abundant energy and healthy environments
It really does resonate with people we're trying to attract
And in terms of how do you offset the wage pressure, it's really through efficiency programs
So, as we've talked, we've invested a lot in field technology
That's bearing fruit and enabling us to help our team do more and handle more as we take the admin off them and automate that kind of work
We have many more programs like that now that we have the installed base, the field technology in their hands, and that's in the base business or the run rate
So, those are really the steps we have to take, but I wouldn't be signaling that there's going to be some fundamental shift in wage pressures
We've had wage pressure
We expect to continue to have some wage pressure, but I don't think it's going to be at a dramatically different trajectory
Yeah, Life Sciences business chase (16:30) is a big market
It's very well designed for us
It's dominated by large multinationals who have significant hygiene needs, as you might imagine
With a change in their business model, where they're going from long-run to shorter-run drugs and even cosmetics, changeover is important
And so our ability to help manage changeover time, water consumption, hygiene, all fits very much their needs, and our ability to do it consistently across the globe is also important
So, as we look at this, it already is a higher-than-average margin business
We would expect it to remain so, given the fit for what we do and the critical needs that our customers have in this area
It's going to act a bit like Kay and then it's going to be lumpy, meaning we're going after large customers
They aren't all going to come on smoothly, so I think you're going to see some knockout quarters and other quarters that may be single digits, not double digits
But in total, our expectation for this business is it's a double-digit organic growth business
We will look to see if there are smart acquisitions to be made
But that's to be seen
We're not relying on it
Fundamentally, we've got the capability we need and we can build what we don't, and we're getting after this
So, we're quite excited about this market and the potential
No, I think Europe will do better as the year goes on
I mean, Europe is a combination of somewhat the environment, but I would also say, I think, there's some things we can do better in Europe
And certainly, we've got a couple of businesses pulling down the overall
I mean, as it stands, what I would say is, we expect Europe to have modest sales growth and modest OI ratio improvement for the year
And what we're going to work hard to do is improve that outlook as we go forward
I don't think it's going to dominate the news in terms of company performance, and I think the forward quarter is going to be better than this one
Yeah, I would say heavy, in total, I'll get down to organic, had growth in this quarter and we expect it to accelerate
Mining narrowed its decline, I mean it was low single digits, better than the fourth, which is clearly better than the third
We'd expect mining to start showing growth maybe as early as this quarter, more likely in the third quarter
So, I'm not sure it's all that important, but it's clearly making the progress we expect
And we expect heavy to continue to accelerate throughout the year
The comps for water, for heavy and mining, in particular, improve throughout the year
And so, we'd expect you're going to see overall acceleration in water as a consequence
Under the heading you got to get the big ones right, we are
So, we really – we've liked Anios and admired it for a long time and for good reason
I think everything that we're learning is what a quality company and business it is
It's a lot easier to integrate a business that operates well because in all, the new stuff that you can bring to them and also the ideas you can take from them for the other businesses, it's going on a firm foundation
That's certainly what we have there
So, yeah, Anios, it's growing
We're seeing the operating leverage we expected
We're on track
We believe to deliver good synergy numbers
My hope is that we exceed it this year, we'll see
But yeah, we feel very good about it, still early days, but it's off to the right start
Well, I would certainly say I think anytime a company goes through a transition like the one that either GE Water or Diversey has to go through, i
, a big ownership change, certainly causes distraction
We've seen it in the past
We expect to see it going forward, and we aren't shy about working to capitalize on it
We feel it's our responsibility
So, we have – let's just say, I talked about the Institutional efforts
We have very strong efforts everywhere to get after new business
We had a good first quarter from a new business standpoint
We had a very significant ratio against our key competitors in terms of win/loss, I would say stronger ratios than we had in 2016, which were quite strong as well, so we're all over this
I wouldn't say that's the reason we're confident we can accelerate, but it's certainly another, I guess, thought to put in the back
So, we'll accelerate
Yeah, I think caustic and propylene, in particular, caustic's up this year for us
It's a main raw material in our Institutional F&B businesses, in particular
We also have propylene, which is expected to peak in the second quarter as new capacity comes on, as we go forward
And I think propylene run-up was the surprise that we had early in this year versus expectations
Caustic, we expected to see go up, and it did go up
Well, I'll do the second first question
No, I think the second half, it'd be a more realistic run rate model for what we would expect in 2018 in the first
I mean, the first had – the single largest impact is hedging, and hedging is going to account for literally like a 4.5 point with a 5-point drag on EPS, 5 percentage points, 500 basis points in the first quarter
It's going to be 4 in the second, so 4.5 for the first half all by itself
It does go away
It's simply – these were foreign hedges that we put on in a rising dollar environment
It's really not that there are huge negative costs in the first half
We're just comparing against a year-ago period, where you had very favorable contributions from the hedging activity as the dollar was rising
So, you got to go – we normalize, we look at our GP progression ex-hedge to understand really what's going on underneath, and it's all the stuff you would expect, which is why we're very quite confident in the second half
So, we do not expect next year to have year-on-year hedging impacts, simply because we aren't benefiting this year from them
So, there's nothing really to compare against
The others were sort of oddities, and normally you don't get this many stacked up, but a lot of it's good news
We're investing in new technologies for institutional solids
We have a lot of new business wins, where we have a lot of installs focused on a specific quarter, where we're not realizing the volume from those installs, but you're realizing the cost
We typically don't have this many stacked up at one time and in a couple quarter period
I don't mind it, but it does make GP look artificially low for a period of time, and we know that goes away
Based on our history, this is unusual
If it happened again, I would explain it again and be happy about it again
In terms of GCS, it's really not a retention change
Retention's always been a bit of a challenge there in the field workforce
We spend more than other people training our team
They get poached at times by competitors
There's not a change in retention of our employee base
What's changed is just how fast we've been able to add on new people to replace those that are leaving
And there, we got a little bit behind in Q4 and are catching up on Q1. I don't think this is going to be an ongoing challenge for the business
It's just a bit of a near-term challenge
No, I think our QSR business, I'm not worried about at all
You're right, the quarter was a little bit soft in terms of growth rate, I mean, but it's still growing at what five and change
But it's going to accelerate throughout the year
We've sold a bunch of business in that – in QSR
And we've rolled it out a lot of it, we're going to start seeing the volume coming in, in the second quarter, and we'll enjoy 100% of it kind of at run rate in the second half
So, it's just a timing issue
It's nothing fundamentally wrong or to worry about our QSR business
Yeah
I don't think we've seen the peak sales and OI in our Energy business for all time by any stretch
So, yeah, I think ultimately we'll reach and I would expect to exceed those levels down the road
Has there been change in the industry? Yeah, I would say all kinds
And in some areas, yeah, it's more efficient, we're more efficient
It can take less chemical in some cases, but there are other applications that take more
The net story that we've always talked about, which is easy oil transitioning to harder-to-get oil is still fundamentally the driver and that has not changed
So, that market continues to become more attractive over time as exploration picks up, which really isn't this year, but we think more meaningfully in 2018 and really in 2019. They're going to have to go after the harder-to-find oil because the easy oil's gone and when they do that, the average, if you will, consumption of our technology per barrel will continue to rise and that's the fundamentals in the business
So, we plan on continuing to gain share
The market will recover
It's not going to be identical to the business that we had in 2014 because that industry continues to evolve and will continue to evolve, but I think we're in great shape to evolve with it and continue to increase our competitiveness
Yeah, look, I mean, several things
Yeah, I think F&B you saw acceleration
We expect continued improvement throughout the year as we go forward
So, we expect the second half to be stronger than the first half
The team has been investing in more corporate account head count, I think, wisely
That business has been successful over a long period of time, probably analysis the team did said hadn't been expanding the corporate accounting probably as fast as we've been expanding share and if we want to continue to have capacity there, we got to add to it which they've been doing
And I think it's already showing that it was the right move
So, I don't know, I remain – yeah, I would expect that business to be better this year, and knowing what we know now, I would say we should at least hold that growth rate moving into 2018. <UNK> S
<UNK> - Credit Suisse Securities (USA) LLC Great
And just very quickly on the Pest Elimination business, you mentioned you saw strong growth in North America and APAC, but can you just comment on the key puts and takes in Latin America and then Europe in both the short and long term? And also, just the overall longer-term view of that business, is that a segment which you'd consider doing M&A in, as well as any other initiatives? Thank you
Yeah, well, we love the Pest business, and so absolutely, on your M&A question, and we've done M&A and we would be a happy acquirer of a good business at a reasonable price
It's the second part of that equation that's been hard to find recently
People have been paying, in our mind, too rich of multiples in pest
Pest is attractive for many reasons, but one of its real attractiveness is its return on invested capital
It doesn't require a lot of capital
The only way you screw that equation up is you pay too much for a business
Now you've got too much invested and you've lost the heart or the secret to that business, in a sense
So, we're going to be wise people as it comes to M&A
In terms of what's going on, it's really more a Europe story
Latin America's a relatively small business, and Europe is just sort of – you get paid as you serve
Our service calendar was a little out of whack in the first quarter
There's catch-up activity underway in the second quarter, and so I'm confident ultimately that all comes back around and I'm not really worried about the Pest business
I think those guys are doing the right things and they've got good momentum
<UNK> - Credit Suisse Securities (USA) LLC Great
Yeah
It was up double digits in the first quarter
I mean, grew faster, obviously, than in the fourth
Yeah, WellChem was up just north of 20% in the first quarter
We expect it to continue to accelerate based on our projection of what's going to happen in terms of rigs and rig activity
Yeah
I would say the big noise in the Industrial business was hedge, particularly in the water business
If you get out – so in water, I think it was off 70 basis points, and 50 basis points of that was a hedge
So, that's the dominant story there
And that's a little bit just kind of one-time comparison
If you take it out, you start seeing the natural trajectory you would expect to see in our Industrial gross profit margin
They are getting pricing
Pricing accelerated in the first quarter for our Industrial businesses versus what they were able to get last year, so they're on track in terms of doing what they need to do to offset raws
Once the hedge comes off, which is after second quarter, I think you'll see a more natural view of their GP
Yeah, there's not a significant gross profit difference one to the other
And so here's what's going on
I mean, you would see this in other Energy-related businesses
So, North America went into whatever you want to call that, a recession, clearly much earlier than the balance of the world, and they're coming out of it earlier than the other parts of the world
So, if you will, the Vs just aren't lined up, U.S
versus international
It's really driven by structure of the industry
Much of the international business or big hunks of it are owned by governments
It's used to pay their bills
So, when oil dropped, they actually worked to up their production
That works for a while, but without new CapEx, you can't keep at that pace forever
So you're starting to see that curtail and it will continue to curtail until they start drilling again
business dropped off dramatically in terms of its productivity when the oil price dropped because it's more privately owned, and so it reacts to the market and doesn't chase lower-margin business with more dollars, which other parts of the world will
But now you're seeing it rebound as the oil price rebounds and they're starting to chase the opportunity
The big picture in the oil market, I would say, is that you're starting to see a rebalance of supply and demand
So, demand this year is projected to be 1.2% growth, and production right now in the first quarter was down 0.4%
So, that's the stuff that everybody needed to see
We're going to see oil bounce around, we always thought, we talked $45 to $55. We didn't expect a big recovery this year in terms of oil price
We think that's more a 2018 story
We also don't see oil falling off a cliff either
And so I think there's slow improvement in activity, which we're seeing is – what we're going to continue to see until we start seeing prices more in the 60s and north, and there's a great deal of confidence that that's really going to stay
When you see that, I think you're going to see a big upturn in activity, and that's when you're going to see even faster growth than we're projecting now for our business
Good news is, though, our Energy business, it's no longer a drag on the business
I think it'd be minorly accretive, but just being neutral is a significant improvement over the last two years and going forward, this business can be a very strong piece of our growth story
Yeah, I don't – I would say this
Room demand isn't – it slowed a bit in North America
It was better in Europe and parts around the world, so I just don't think the lodging isn't really the story
I really think it's what we talked about earlier
What we saw that was unusual and correlates with sort of what we see in our metrics was consumption was down in U.S
restaurants
It wasn't negative, it was just much slower growth than we've seen in the past
And that's a hole or volume that we thought we were going to see that we didn't see, but we believe it's overcome-able by getting after and stepping on new business activity, which the team's done
And I would just say this, our U.S
Institutional team is very strong, they're very good when focused and they're very focused
Yeah, on our appetite, we'd be very comfortable doing a deal of size as long as we feel it's going to be a good deal for us
The story about the asset, just as when is quite complicated
So, I would just say that doesn't change my view
I think I even said a year ago, I'd be surprised if we do a big deal in the very near term and quite surprised if we don't do one over the next five, six years
I think that my view still holds there
So, our appetite isn't diminished at all
I think we just go in eyes wide open and try to fully understand what the risks are and the challenges are in any deal and as a consequence, what price makes sense
Really in Energy, it's about 30%
Water's just a little south of that in terms of percent
Those are where we have the big cost-plus contracts, there's a few others spattered across the other segments, but they're not significant
But, yeah, those will always lag
I mean, they lag going down, and they lag going up simply because you've got to realize the cost in your business before you're going to be – before you're able to price for them
Well, since all my prior stance seems to have worked, I'm going to tell you I'm still not enamored with the business because it seems to spur them on
Now I would say that's not really – where we were on that is, I just said as a stand-alone, we probably wouldn't have bought it
But as a business that came along, it was a pretty darn good business in many respects
We haven't changed our feeling on it
It's got a great team, and I think the team has gotten better
So, how are they growing it? It's called the old-fashioned way
New business, they've had new technology
They're gaining share, they're doing smart things in terms of getting their portfolio to be more focused on where you see growth in that industry like tissue, towel and boxes versus newsprint and other materials, so those have been smart moves
They don't happen overnight, so it's been an ongoing effort
So, yeah, you've seen sales acceleration
As they keep selling new business, they're going to keep seeing sales acceleration
And I think they've managed the challenges successfully
So, I don't – that's the story there
Textile is not that fundamentally different
If you sell new business, good things happen, and if you don't, they don't
Yeah, I mean, same-store sales, look, I don't think is the singular metric that drives our business – or, excuse me, traffic
Traffic's been down, I think, every year since 2008. I keep asking the team, is there one person left to walk into our restaurant based on these metrics
Clearly, if you look at the sales in that industry, they were also up over most of those years
And yeah, there are changes going on in that industry
They're not dramatic
I don't think they're going to hit huge inflection points, but we watch them
So, certainly there's higher percent of takeout than there was 10 years ago
I'd expect in 10 years, there'll be even a higher takeout than there is right now
So, you see some of these changes over time
With that said, the challenges in that industry simultaneously continue to increase
People continue to get into that business, start new concepts, grow their business, food safety, clean labels, i
, organic food without additives and the like
All these things are also impacting that business and our customers, and our ability in food safety is more important even today than it was 5 years ago and 10 years ago
So, I guess – I think when I take all of the shifts that are going on in that industry and net it out, it's still quite an attractive market for us, both in the U.S
and around the world
And we have significant share possibilities, not only in the U.S
, but in particular, around the world, that we continue to get after
Yeah
I think we've said 24% to 25%
Yes
So, last year, we talked, we had probably lost about 3 points of top line to price in that business
And it started getting modestly better as we went throughout the year last year
We saw continued improvement in the first quarter
Second half, I would say it would be neutral to positive on price
Yeah
I would say, right now, it's more a reflection of rig count increase and activity increase
I would say several things
I mean, what we've been working on products and programs and have them, that reduces the need for companies conducting a frac in terms of how much water they need, how much sand they need, et cetera, to conduct this
Less is better
And we'd rather cannibalize ourselves than get cannibalized
Some instances, it takes less chemical, and there are other applications where it would take more of our product to get that same result
I think, over time, I mean, this kind of shifting of how much technology it takes to get an end result, I think, if you look over any long period of time, it typically gets more efficient
We would expect that to continue to be true, but challenges continue to grow
And so the need for technology evolves
So, I had somebody try to say that fracking's going to disappear, and I do not think that's the way to think about it
It's going to continue to evolve and change, but there are plenty of opportunities for us to introduce new programs that bring great benefit to those conducting a frac that's going to represent new opportunity for us even as others may dissipate slightly
Yeah, well, Healthcare, yeah, clearly has improved
I mean, it's a 5% underlying organic rate, if you peel out Anios and the other
And, look, I think the team's doing a very good job
I mean they went through and are doing a lot of integration work that started even before, obviously, the close of Anios
They continue to drive and accelerate their underlying business
So, the work that we did and the work that team did around getting clarity around the program, clarity around the message for customers, adding resources where they needed them, we've continued to add additional talent into that team and it's paying dividends
So, where am I? Yeah, I'm proud that the team's been able to build this up to 5%
And then the other side of me is greedy, and I think that team's capable of doing even more, and it's only because I think they're great
So, 5% is good, 7% is better, that's our focus
Yeah, us too
It took us longer to exit the hygiene business than we had planned, which delayed our exit from a number of facilities because we had to continue to operate it until we could move it
And so it was a couple quarters after we had thought we were going to be able to move it
So, that delayed a number of things
That's why you're seeing some of the charges come through now versus, say, third quarter of last year, et cetera
In total, I think the Swisher noise is really going to be out of the business come third quarter as we go through
So, then it's just going to be a completely natural part
The exiting and the comparison with hygiene and all the other stuff will be out of the base
Well, the most significant probably underlying change would be in dairy
Clearly, dairy was under a lot of pressure
The market's improved somewhat
I don't know that all dairy producers would call it a victory yet, but it certainly helps as we've gone through
Food continues to be pressured by consolidation
There's a lot of, obviously, big headline acquisitions that have been made in that industry
Some others that seem to be contemplated, but not consummated
And brewery beverage is strong and that's more a continuing story
So, the inflection one would be mostly in our dairy business
I don't – you know what, I don't believe so
I honestly haven't seen those advertisements, but of course, I live in a state that borders Wisconsin, so we wouldn't likely be airing them in this market
So, anyway, no, I would say if anything dairy has gotten better because it was so depressed
I have not seen any impact from the advertising you talked about
I don't think we feel that our ability to earn the type of margins that we were earning or targeted has changed
So, the margins have been most impacted near term just by loss of volume on a fixed overhead base, particularly in plants
And so I think as this business comes back, which we expect it to, as we continue to roll out technology and the needs for technology continue to grow as old oil becomes new oil, which is harder oil and needs more technology, we think we'll continue to see margin expansion
Now, that's all predicated on us being a great value-added supplier to our customers
Only reason people are going to pay margin to us is if they get great value, and I think our team understands that
Stuff we have on the drawing board, we are quite pleased with
Stuff that we're launching, we think has got great runway
So, I mean, we remain bullish about this business
Well, the reason we broke it out is it creates focus
So, previously, we've been serving the Life Sciences industry in part from the F&B business and in part from the Healthcare business
And both were doing a good job with the tools at hand, but neither had a complete set of tools
So, if anything, once we decided to do it, we wondered why it took us so long
That's a shot at myself
So, getting focused, I mean, think the Kay business going after QSR, textile, going after textile, we have many examples of this
That's how we succeed
So, now we've got a freestanding business
It was a significant investment last year and we're still paying some of the incremental investment this year in the first half before we fully lap it
And the second, has enabled us to have dedicated corporate account teams, dedicated marketing teams, dedicated corporate account finance teams to really understand how to develop and position programs to specifically meet this industry's need
The structure is multinationals, which is what we like, fragmented competitive set, which is what we like
So, by and large, what we're competing against is a lot of regional folks who are offering services to this industry
And so our ability to put together a global program we believe will give us the same kind of advantage here that it does in other industries we serve because certainly the pharma need for consistency, you might imagine, would be fairly high in areas that we're serving
So, I don't know if that helps give you color
Big business, plenty of opportunity
We can grow without doing M&A
If we see M&A that works, we'll certainly be quite open to it
Yeah
I think if you look at – it's kind of a combination of just underlying commodity costs starting to rise and then transaction costs and foreign currency that – because a lot of these are U.S
dollar denominated, so if I'm buying them in reals, et cetera, I got to pay a higher price given the devaluation over time
We see that rising, ironically peaking around the second quarter
Part of this is the propylene conversation we had earlier, but still being somewhat a year-on-year drag in three and four, which is not at the same level, but overcome by pricing
And I talked earlier that we have pricing traction
Pricing is never easy
We're getting it
Institutional, I think was ahead on ramping up its pricing activity last year, trying to get in front of the caustic moves and some of the other stuff they knew was coming
And you see the Industrial businesses now accelerating their pricing activity, which they need to do, given the increased raw materials facing them
So, I guess, we're confident we're going to end up with some daylight between the costs we realize incremental on raws and FX related to raws and the pricing that we're going to get
Yeah, I guess – no, I would not say – I mean, look, we do a lot of analysis on our business to understand retention, new business, acquisition and sort of current customer consumption
Retention really – I mean, if you look at our historic retention rates, I mean, we're under – we're better retention rates than we've been historically in that business
So, if it was competitive activity, you would see it in worsening retention rates, and that's just not what we're seeing as really the story
The big dip is in kind of same-store consumption
It's not a loss of product placements, if you will, in those units
It's a loss of consumption across those products
And that's the story
So, we aren't – we don't believe that we're infallible or unbeatable or anything else, we pay a lot of attention to competition
I just don't think that's the story
Yeah, I don't know that that's really a huge piece of emphasis for them, to be quite honest
I mean, they just made a large acquisition
They've been quite successful in the businesses they're in
I just – I don't know that that's really an avenue they're going
I don't know that it lends itself
I mean, that's a little bit – they're a much better executor, I would say
They're a good company, does a very good job in the businesses they're in, but it's hard to take people in one set of business and make them kitchen hygiene people just because they're in the back of the restaurant
That was Swisher's play
It wasn't very successful, although I grant you, and I think the company you're talking about is a much better executor
