Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Ecolab Inc., solvency ratios
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The solvency profile of the entity exhibited a distinct V-shaped trajectory between 2017 and 2021, characterized by a period of deleveraging followed by a significant increase in debt utilization and a subsequent partial recovery in coverage capacity.
- Debt and Capital Structure Ratios
- A consistent downward trend in leverage was observed from 2017 through 2019. The debt to equity ratio declined from 0.96 to a period low of 0.73, while the debt to assets ratio reached its minimum of 0.30 in 2019. This trend was mirrored in the debt to capital ratio, which decreased from 0.49 to 0.42 over the same period. However, this trend reversed sharply in 2020 and 2021, with the debt to equity ratio rising to 1.21 and the debt to assets ratio increasing to 0.41 by the end of 2021. The inclusion of operating lease liabilities marginally elevated these ratios throughout the period but did not alter the overall directional trend.
- Financial Leverage
- Financial leverage followed a pattern similar to the debt ratios, contracting from 2.62 in 2017 to 2.40 in 2019. A significant expansion occurred in 2020, where leverage rose to 2.94 and remained stagnant at that level through 2021, indicating a higher reliance on borrowed funds to finance assets compared to the 2017-2019 baseline.
- Coverage Ratios
- The ability to service debt obligations showed strength through 2019, with the interest coverage ratio peaking at 9.82 and the fixed charge coverage ratio reaching 5.37. A substantial contraction occurred in 2020, with interest coverage dropping to 4.81 and fixed charge coverage falling to 3.38. By 2021, a notable recovery was observed, as the interest coverage ratio rose to 7.13 and the fixed charge coverage ratio returned to 4.45, suggesting an improved capacity to meet fixed financial obligations despite the higher overall debt levels.
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Debt to Equity
Ecolab Inc., debt to equity calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term debt | 411,000) | 17,300) | 380,600) | 743,600) | 564,400) | |
| Long-term debt, excluding current maturities | 8,347,200) | 6,669,300) | 5,973,500) | 6,301,600) | 6,758,300) | |
| Total debt | 8,758,200) | 6,686,600) | 6,354,100) | 7,045,200) | 7,322,700) | |
| Total Ecolab shareholders’ equity | 7,224,200) | 6,166,500) | 8,685,300) | 8,003,200) | 7,618,500) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 1.21 | 1.08 | 0.73 | 0.88 | 0.96 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Linde plc | 0.33 | — | — | — | — | |
| Sherwin-Williams Co. | 3.95 | — | — | — | — | |
| Debt to Equity, Sector | ||||||
| Chemicals | 0.52 | — | — | — | — | |
| Debt to Equity, Industry | ||||||
| Materials | 0.55 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to equity = Total debt ÷ Total Ecolab shareholders’ equity
= 8,758,200 ÷ 7,224,200 = 1.21
2 Click competitor name to see calculations.
The solvency profile of the organization exhibited significant fluctuations between 2017 and 2021, transitioning from a period of deleveraging to a period of increased financial leverage.
- Total Debt Evolution
- A downward trajectory in total debt was observed from 2017 to 2019, with balances decreasing from US$ 7,322.7 million to US$ 6,354.1 million. This trend reversed in 2020 and accelerated sharply in 2021, when total debt reached a five-year peak of US$ 8,758.2 million.
- Shareholders' Equity Trends
- Equity levels grew steadily between 2017 and 2019, peaking at US$ 8,685.3 million. A substantial contraction occurred in 2020, with equity falling to US$ 6,166.5 million, followed by a partial recovery to US$ 7,224.2 million by the end of 2021.
- Debt to Equity Ratio Analysis
- The debt to equity ratio mirrors the inverse relationship between debt and equity over the analyzed period. The ratio improved from 0.96 in 2017 to a low of 0.73 in 2019, indicating a strengthening solvency position. However, a pivot occurred in 2020, where the ratio climbed to 1.08 and further increased to 1.21 by 2021. This progression indicates that by the end of 2021, the organization's total debt exceeded its total shareholders' equity, reflecting a strategic or operational shift toward a more leveraged capital structure.
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Debt to Equity (including Operating Lease Liability)
Ecolab Inc., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term debt | 411,000) | 17,300) | 380,600) | 743,600) | 564,400) | |
| Long-term debt, excluding current maturities | 8,347,200) | 6,669,300) | 5,973,500) | 6,301,600) | 6,758,300) | |
| Total debt | 8,758,200) | 6,686,600) | 6,354,100) | 7,045,200) | 7,322,700) | |
| Current operating lease liabilities | 115,100) | 125,600) | 153,200) | —) | —) | |
| Noncurrent operating lease liabilities | 282,600) | 300,500) | 425,200) | —) | —) | |
| Total debt (including operating lease liability) | 9,155,900) | 7,112,700) | 6,932,500) | 7,045,200) | 7,322,700) | |
| Total Ecolab shareholders’ equity | 7,224,200) | 6,166,500) | 8,685,300) | 8,003,200) | 7,618,500) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 1.27 | 1.15 | 0.80 | 0.88 | 0.96 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Linde plc | 0.35 | — | — | — | — | |
| Sherwin-Williams Co. | 4.72 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Chemicals | 0.57 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Materials | 0.60 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Total Ecolab shareholders’ equity
= 9,155,900 ÷ 7,224,200 = 1.27
2 Click competitor name to see calculations.
Between 2017 and 2021, the company experienced a notable shift in its capital structure, transitioning from a period of deleveraging to a period of increased financial leverage. While the solvency position improved initially, significant volatility in shareholders' equity and a substantial increase in total debt in later years led to a higher debt-to-equity ratio.
- Deleveraging Phase (2017–2019)
- A consistent improvement in solvency was observed during this period. Total debt, including operating lease liabilities, decreased from US$ 7,322,700 thousand in 2017 to US$ 6,932,500 thousand in 2019. Simultaneously, total shareholders' equity grew from US$ 7,618,500 thousand to US$ 8,685,300 thousand. This dual movement resulted in the debt-to-equity ratio declining from 0.96 to 0.80, reflecting a reduced reliance on borrowed funds relative to equity.
- Equity Contraction and Ratio Pivot (2020)
- The year 2020 marked a pivot in the solvency trend. Total shareholders' equity experienced a sharp decline to US$ 6,166,500 thousand, while total debt increased slightly to US$ 7,112,700 thousand. This combination caused the debt-to-equity ratio to rise significantly to 1.15, marking the first instance in the analyzed period where total debt exceeded total equity.
- Accelerated Leverage Increase (2021)
- The upward trend in leverage accelerated in 2021. Total debt rose sharply to US$ 9,155,900 thousand, the highest level in the five-year period. Although shareholders' equity recovered to US$ 7,224,200 thousand, the increase in debt outpaced the equity recovery, pushing the debt-to-equity ratio to a peak of 1.27.
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Debt to Capital
Ecolab Inc., debt to capital calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term debt | 411,000) | 17,300) | 380,600) | 743,600) | 564,400) | |
| Long-term debt, excluding current maturities | 8,347,200) | 6,669,300) | 5,973,500) | 6,301,600) | 6,758,300) | |
| Total debt | 8,758,200) | 6,686,600) | 6,354,100) | 7,045,200) | 7,322,700) | |
| Total Ecolab shareholders’ equity | 7,224,200) | 6,166,500) | 8,685,300) | 8,003,200) | 7,618,500) | |
| Total capital | 15,982,400) | 12,853,100) | 15,039,400) | 15,048,400) | 14,941,200) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.55 | 0.52 | 0.42 | 0.47 | 0.49 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Linde plc | 0.25 | — | — | — | — | |
| Sherwin-Williams Co. | 0.80 | — | — | — | — | |
| Debt to Capital, Sector | ||||||
| Chemicals | 0.34 | — | — | — | — | |
| Debt to Capital, Industry | ||||||
| Materials | 0.36 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to capital = Total debt ÷ Total capital
= 8,758,200 ÷ 15,982,400 = 0.55
2 Click competitor name to see calculations.
The solvency profile between 2017 and 2021 exhibits two distinct phases: an initial period of deleveraging followed by a significant increase in financial leverage.
- Debt to Capital Trend
- The debt to capital ratio experienced a steady decline from 0.49 in 2017 to a period low of 0.42 in 2019, indicating a strategic reduction in the proportion of debt relative to total capital. This trajectory reversed sharply after 2019, with the ratio rising to 0.52 in 2020 and reaching a five-year peak of 0.55 by December 31, 2021.
- Debt Obligations
- Total debt followed a U-shaped trajectory. After decreasing from $7.32 billion in 2017 to $6.35 billion in 2019, debt obligations increased sequentially over the following two years, culminating in a substantial rise to $8.76 billion in 2021. The increase between 2020 and 2021 represents the most significant expansion of debt levels across the analyzed period.
- Capital Base Volatility
- Total capital remained relatively stable near $15 billion from 2017 through 2019. A notable contraction occurred in 2020, where total capital dropped to $12.85 billion, which contributed to the spike in the debt to capital ratio despite relatively moderate debt levels at that time. By 2021, total capital recovered and expanded to $15.98 billion, the highest level in the reporting period, although this growth was offset by the simultaneous surge in total debt.
In summary, the financial structure transitioned from a decreasing leverage position toward a more debt-heavy capital composition. The increase in the debt to capital ratio in the final two years was driven by both a temporary contraction of the capital base in 2020 and a substantial increase in total debt by 2021.
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Debt to Capital (including Operating Lease Liability)
Ecolab Inc., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term debt | 411,000) | 17,300) | 380,600) | 743,600) | 564,400) | |
| Long-term debt, excluding current maturities | 8,347,200) | 6,669,300) | 5,973,500) | 6,301,600) | 6,758,300) | |
| Total debt | 8,758,200) | 6,686,600) | 6,354,100) | 7,045,200) | 7,322,700) | |
| Current operating lease liabilities | 115,100) | 125,600) | 153,200) | —) | —) | |
| Noncurrent operating lease liabilities | 282,600) | 300,500) | 425,200) | —) | —) | |
| Total debt (including operating lease liability) | 9,155,900) | 7,112,700) | 6,932,500) | 7,045,200) | 7,322,700) | |
| Total Ecolab shareholders’ equity | 7,224,200) | 6,166,500) | 8,685,300) | 8,003,200) | 7,618,500) | |
| Total capital (including operating lease liability) | 16,380,100) | 13,279,200) | 15,617,800) | 15,048,400) | 14,941,200) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.56 | 0.54 | 0.44 | 0.47 | 0.49 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Linde plc | 0.26 | — | — | — | — | |
| Sherwin-Williams Co. | 0.83 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Chemicals | 0.36 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Materials | 0.38 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 9,155,900 ÷ 16,380,100 = 0.56
2 Click competitor name to see calculations.
The solvency profile exhibits a fluctuating trend over the five-year period, characterized by an initial decline in leverage followed by a marked increase in the proportion of debt within the total capital structure.
- Debt to Capital Ratio Trend
- The ratio decreased steadily from 0.49 in 2017 to a period low of 0.44 in 2019. A reversal occurred in 2020, with the ratio climbing to 0.54 and further increasing to 0.56 by the end of 2021. This indicates a transition toward a more debt-heavy capital structure in the latter part of the analyzed period.
- Total Debt Dynamics
- Total debt, including operating lease liabilities, remained relatively stable between 2017 and 2020, fluctuating between 6.93 billion and 7.32 billion US dollars. A significant increase is observed in 2021, where total debt rose to approximately 9.16 billion US dollars, representing a substantial expansion of liabilities compared to the preceding four years.
- Total Capital Volatility
- Total capital showed steady growth from 2017 to 2019, peaking at 15.62 billion US dollars. A sharp contraction occurred in 2020, with capital falling to 13.28 billion US dollars; this reduction in the denominator contributed significantly to the spike in the debt-to-capital ratio during that year. By 2021, total capital recovered to 16.38 billion US dollars, although the simultaneous increase in debt resulted in a higher overall leverage ratio.
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Debt to Assets
Ecolab Inc., debt to assets calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term debt | 411,000) | 17,300) | 380,600) | 743,600) | 564,400) | |
| Long-term debt, excluding current maturities | 8,347,200) | 6,669,300) | 5,973,500) | 6,301,600) | 6,758,300) | |
| Total debt | 8,758,200) | 6,686,600) | 6,354,100) | 7,045,200) | 7,322,700) | |
| Total assets | 21,206,400) | 18,126,000) | 20,869,100) | 20,074,500) | 19,962,400) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.41 | 0.37 | 0.30 | 0.35 | 0.37 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Linde plc | 0.18 | — | — | — | — | |
| Sherwin-Williams Co. | 0.47 | — | — | — | — | |
| Debt to Assets, Sector | ||||||
| Chemicals | 0.23 | — | — | — | — | |
| Debt to Assets, Industry | ||||||
| Materials | 0.22 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to assets = Total debt ÷ Total assets
= 8,758,200 ÷ 21,206,400 = 0.41
2 Click competitor name to see calculations.
The solvency profile between 2017 and 2021 exhibits a U-shaped trajectory, characterized by an initial period of deleveraging followed by a notable increase in financial leverage. The relationship between total debt and total assets shifted from a position of strengthening solvency to a more aggressive debt posture by the end of the observed period.
- Deleveraging Phase (2017–2019)
- A consistent reduction in total debt is observed from December 31, 2017, to December 31, 2019, with obligations falling from US$ 7,322,700 thousand to US$ 6,354,100 thousand. Simultaneously, total assets increased steadily, peaking at US$ 20,869,100 thousand in 2019. This combination of debt reduction and asset growth resulted in the debt to assets ratio declining from 0.37 to a period low of 0.30, indicating a strengthened solvency position.
- Asset Contraction and Leverage Shift (2020)
- A reversal in the trend occurred in 2020, marked by a significant contraction in total assets, which fell to US$ 18,126,000 thousand. During the same period, total debt began to rise, reaching US$ 6,686,600 thousand. The simultaneous decrease in the asset base and increase in liabilities caused the debt to assets ratio to return to 0.37, effectively erasing the solvency gains achieved over the previous two years.
- Debt Expansion (2021)
- The most significant increase in leverage occurred by December 31, 2021, as total debt rose sharply to US$ 8,758,200 thousand. Although total assets recovered to a five-year high of US$ 21,206,400 thousand, the growth in debt outpaced the asset expansion. Consequently, the debt to assets ratio reached its highest point in the analyzed period at 0.41, reflecting a higher reliance on borrowed capital to fund the asset base.
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Debt to Assets (including Operating Lease Liability)
Ecolab Inc., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term debt | 411,000) | 17,300) | 380,600) | 743,600) | 564,400) | |
| Long-term debt, excluding current maturities | 8,347,200) | 6,669,300) | 5,973,500) | 6,301,600) | 6,758,300) | |
| Total debt | 8,758,200) | 6,686,600) | 6,354,100) | 7,045,200) | 7,322,700) | |
| Current operating lease liabilities | 115,100) | 125,600) | 153,200) | —) | —) | |
| Noncurrent operating lease liabilities | 282,600) | 300,500) | 425,200) | —) | —) | |
| Total debt (including operating lease liability) | 9,155,900) | 7,112,700) | 6,932,500) | 7,045,200) | 7,322,700) | |
| Total assets | 21,206,400) | 18,126,000) | 20,869,100) | 20,074,500) | 19,962,400) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.43 | 0.39 | 0.33 | 0.35 | 0.37 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Linde plc | 0.19 | — | — | — | — | |
| Sherwin-Williams Co. | 0.56 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Chemicals | 0.26 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Materials | 0.24 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 9,155,900 ÷ 21,206,400 = 0.43
2 Click competitor name to see calculations.
The solvency profile from 2017 to 2021 is characterized by an initial period of leverage optimization followed by a significant increase in the proportion of assets financed by debt.
- Debt to Assets Ratio Trajectory
- The ratio exhibited a downward trend from 0.37 in 2017 to a low of 0.33 in 2019. This improvement was driven by a concurrent decrease in total debt, which fell from 7.3 billion to 6.9 billion, and a steady increase in total assets. This trend reversed after 2019, with the ratio climbing to 0.39 in 2020 and reaching a peak of 0.43 by the end of 2021.
- Impact of Asset Contraction in 2020
- A critical shift occurred in 2020, where the debt to assets ratio increased to 0.39. While total debt remained relatively stable at 7.1 billion, total assets experienced a significant contraction, dropping from 20.8 billion in 2019 to 18.1 billion. This reduction in the asset base mechanically inflated the leverage ratio despite the absence of a substantial increase in debt obligations during that fiscal year.
- Debt Expansion in 2021
- The most pronounced increase in leverage occurred in 2021, with the ratio reaching 0.43. This was primarily driven by a substantial rise in total debt, which increased to 9.1 billion, representing a significant jump from the previous year's 7.1 billion. Although total assets recovered to a five-year high of 21.2 billion, the growth in debt outpaced asset expansion, leading to an increase in the overall solvency ratio.
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Financial Leverage
Ecolab Inc., financial leverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Total assets | 21,206,400) | 18,126,000) | 20,869,100) | 20,074,500) | 19,962,400) | |
| Total Ecolab shareholders’ equity | 7,224,200) | 6,166,500) | 8,685,300) | 8,003,200) | 7,618,500) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.94 | 2.94 | 2.40 | 2.51 | 2.62 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Linde plc | 1.85 | — | — | — | — | |
| Sherwin-Williams Co. | 8.48 | — | — | — | — | |
| Financial Leverage, Sector | ||||||
| Chemicals | 2.20 | — | — | — | — | |
| Financial Leverage, Industry | ||||||
| Materials | 2.49 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Financial leverage = Total assets ÷ Total Ecolab shareholders’ equity
= 21,206,400 ÷ 7,224,200 = 2.94
2 Click competitor name to see calculations.
The analysis of financial leverage between 2017 and 2021 reveals a period of initial deleveraging followed by a significant increase in financial risk during 2020, which persisted into 2021. The relationship between total assets and shareholders' equity shifted markedly over this five-year window, transitioning from a trend of capital strengthening to one of increased reliance on external financing.
- Financial Leverage Ratio Trends
- A consistent downward trend was observed from 2017 to 2019, with the leverage ratio declining from 2.62 to 2.40. This movement indicates a reduction in the proportion of debt used to finance assets. This trend reversed abruptly in 2020, where the ratio spiked to 2.94. The ratio remained stagnant at 2.94 through December 31, 2021, marking a permanent shift to a higher leverage profile compared to the 2017-2019 period.
- Asset and Equity Dynamics
- Total assets experienced steady growth from 2017 through 2019, peaking at 20.87 billion before a notable contraction in 2020 to 18.13 billion. Shareholders' equity followed a similar trajectory of growth until 2019, reaching 8.69 billion, but suffered a more severe decline in 2020, falling to 6.17 billion. By 2021, total assets rebounded strongly to 21.21 billion, surpassing all previous years in the sequence. However, shareholders' equity only partially recovered to 7.22 billion, remaining below 2017 levels.
- Solvency Implications
- The divergence between asset recovery and equity recovery in 2021 is the primary driver for the sustained high leverage ratio. Because the growth in assets outpaced the recovery of equity, the financial leverage remained at 2.94. This indicates that the expansion of the balance sheet in 2021 was funded primarily through liabilities rather than through retained earnings or new equity infusions.
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Interest Coverage
Ecolab Inc., interest coverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income (loss) attributable to Ecolab | 1,129,900) | (1,205,100) | 1,558,900) | 1,429,100) | 1,508,400) | |
| Add: Net income attributable to noncontrolling interest | 14,100) | 17,400) | 17,300) | 11,200) | 14,000) | |
| Less: Net loss from discontinued operations, net of tax | —) | (2,172,500) | —) | —) | —) | |
| Add: Income tax expense | 270,200) | 176,600) | 322,700) | 364,300) | 242,400) | |
| Add: Interest expense | 230,600) | 304,800) | 215,300) | 237,200) | 274,600) | |
| Earnings before interest and tax (EBIT) | 1,644,800) | 1,466,200) | 2,114,200) | 2,041,800) | 2,039,400) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 7.13 | 4.81 | 9.82 | 8.61 | 7.43 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Linde plc | 45.60 | — | — | — | — | |
| Sherwin-Williams Co. | 7.72 | — | — | — | — | |
| Interest Coverage, Sector | ||||||
| Chemicals | 17.53 | — | — | — | — | |
| Interest Coverage, Industry | ||||||
| Materials | 15.36 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Interest coverage = EBIT ÷ Interest expense
= 1,644,800 ÷ 230,600 = 7.13
2 Click competitor name to see calculations.
The interest coverage ratio exhibited significant volatility between 2017 and 2021, characterized by a period of strengthening followed by a sharp contraction and a subsequent recovery. The capacity to service debt obligations reached a peak in 2019 before experiencing a marked decline in 2020.
- Earnings Before Interest and Tax (EBIT) Trends
- Operating earnings remained relatively stable and showed modest growth from 2017 to 2019, peaking at US$ 2,114.2 million. A substantial contraction occurred in 2020, with EBIT falling to US$ 1,466.2 million, a decrease of approximately 30.6% relative to the prior year. A partial recovery was observed in 2021, as earnings rose to US$ 1,644.8 million.
- Interest Expense Fluctuations
- Interest expenses trended downward from 2017 to 2019, reaching a period low of US$ 215.3 million. This trend reversed sharply in 2020, with expenses increasing to US$ 304.8 million, the highest level recorded in the five-year period. Expenses subsequently declined to US$ 230.6 million by the end of 2021.
- Interest Coverage Ratio Analysis
- The interest coverage ratio improved steadily from 7.43 in 2017 to a high of 9.82 in 2019, indicating a strengthening solvency position. In 2020, the ratio dropped precipitously to 4.81, driven by the dual impact of declining EBIT and rising interest costs. By 2021, the ratio recovered to 7.13, signaling a return toward historical solvency levels and a restored margin of safety for debt servicing.
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Fixed Charge Coverage
Ecolab Inc., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income (loss) attributable to Ecolab | 1,129,900) | (1,205,100) | 1,558,900) | 1,429,100) | 1,508,400) | |
| Add: Net income attributable to noncontrolling interest | 14,100) | 17,400) | 17,300) | 11,200) | 14,000) | |
| Less: Net loss from discontinued operations, net of tax | —) | (2,172,500) | —) | —) | —) | |
| Add: Income tax expense | 270,200) | 176,600) | 322,700) | 364,300) | 242,400) | |
| Add: Interest expense | 230,600) | 304,800) | 215,300) | 237,200) | 274,600) | |
| Earnings before interest and tax (EBIT) | 1,644,800) | 1,466,200) | 2,114,200) | 2,041,800) | 2,039,400) | |
| Add: Operating lease cost | 179,400) | 183,800) | 219,400) | 210,000) | 239,000) | |
| Earnings before fixed charges and tax | 1,824,200) | 1,650,000) | 2,333,600) | 2,251,800) | 2,278,400) | |
| Interest expense | 230,600) | 304,800) | 215,300) | 237,200) | 274,600) | |
| Operating lease cost | 179,400) | 183,800) | 219,400) | 210,000) | 239,000) | |
| Fixed charges | 410,000) | 488,600) | 434,700) | 447,200) | 513,600) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 4.45 | 3.38 | 5.37 | 5.04 | 4.44 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Linde plc | 13.02 | — | — | — | — | |
| Sherwin-Williams Co. | 3.77 | — | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Chemicals | 6.99 | — | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Materials | 8.75 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 1,824,200 ÷ 410,000 = 4.45
2 Click competitor name to see calculations.
The fixed charge coverage for the period between 2017 and 2021 exhibits a pattern of initial strengthening, a significant contraction in 2020, and a subsequent recovery by the end of 2021.
- Earnings before fixed charges and tax
- Operating earnings remained relatively stable from 2017 through 2019, reaching a peak of 2,333,600 thousand US dollars. A substantial decline was observed in 2020, with earnings falling to 1,650,000 thousand US dollars, followed by a partial recovery to 1,824,200 thousand US dollars in 2021.
- Fixed charges
- Fixed obligations demonstrated a general downward trajectory over the five-year span, moving from 513,600 thousand US dollars in 2017 to a period low of 410,000 thousand US dollars in 2021. An anomaly occurred in 2020, where charges increased to 488,600 thousand US dollars.
- Fixed charge coverage ratio
- The solvency ratio improved from 4.44 in 2017 to 5.37 in 2019, indicating an increased capacity to meet fixed obligations. This trend reversed sharply in 2020, with the ratio dropping to 3.38, driven by the concurrent decrease in earnings and increase in fixed charges. By 2021, the ratio rebounded to 4.45, effectively restoring the solvency position to 2017 levels.
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