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Ecolab Announces Restructuring for Cost Savings, Efficiency

Jason Hicks |

ST. PAUL, Minn. — Ecolab Inc. has announced that it plans to undertake restructuring and other cost-saving actions as it streamlines and improves its global business. This will result in a special charge in the fourth quarter of 2008 and a restructuring special charge in 2009. It will produce significant annual cost savings and create a more efficient organization, Ecolab says.
“The restructuring steps we’re taking are designed to better position the company for today’s economic conditions and the future,” says Douglas M. Baker Jr., Ecolab’s chairman, president and chief executive officer. The restructuring is intended to optimize Ecolab’s workforce, facilities, product lines and business portfolios in order to adjust to the current economy while positioning to leverage future growth, he explains. These changes include:
• A reduction of the company’s global workforce by approximately 1,000 positions, or 4%. Those whose jobs are eliminated will be offered severance and outplacement as appropriate.
• An acceleration of product line initiatives reducing finished goods’ SKUs by 40% and optimizing formulations to reduce environmental and cost impact.
• Further optimization of the company’s supply chain, including the planned reduction of plant and distribution center locations.
• The closure of two small, nonstrategic healthcare businesses and the write-down of investments in an energy management business.
“While we are confident these steps are the right ones for Ecolab, we regret that circumstances required associates to leave the company,” Baker says. “We appreciate their contributions and we’ve worked hard to do this in a respectful way, but understand the pain it causes as well.”
Ecolab expects to record a special charge in the fourth quarter of 2008 that will include a pretax charge of approximately $19 million ($18 million after tax) related to the write-down and exiting of the businesses mentioned.
In 2009, Ecolab expects to incur a pretax restructuring special charge of $65-75 million ($42-49 million after tax) as a result of these actions. These actions are expected to provide annualized pretax savings of approximately $70-80 million ($45-50 million after tax, or approximately $0.20 per share), with pretax savings of approximately $50 million (or about $0.13 per share) to be realized in 2009.
“Our unwavering commitment is to strengthen our businesses, our leading market positions, and our opportunities for future growth,” Baker says. “In spite of the tough decisions we’ve had to make and the tough economic environment in which we find ourselves, we believe we are now even better positioned for the future. We have great growth prospects, a robust business model, the industry’s leading customer service, an opportunity to substantially increase our market share, and a strong balance sheet. And most importantly, we have a strong and experienced team ready to drive our business forward.”
 

About the author

Jason Hicks

American Drycleaner

Jason Hicks was assistant editor for American Trade Magazines, which publishes American Coin-Op, American Drycleaner and American Laundry News, for more than nine years, and web editor for three years.

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