Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
Ecolab Inc., profitability 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).
Profitability performance between 2017 and 2021 is characterized by a period of relative stability and gradual margin compression, interrupted by a severe volatility event in 2020 and a subsequent partial recovery in 2021.
- Margin Analysis
- Gross profit margin experienced a significant contraction from 46.49% in 2017 to 41.19% in 2018, remaining relatively stagnant around the 41% mark through 2020 before ending at 40.19% in 2021. Operating profit margin exhibited a consistent downward trend over the same period, declining from 14.60% in 2017 to a low of 11.84% in 2020, with a modest recovery to 12.55% in 2021.
- Net Profitability and Return Metrics
- Net profit margin remained stable between 9.74% and 10.90% from 2017 to 2019 but plummeted to -10.22% in 2020. This sharp decline is mirrored in the Return on Equity (ROE) and Return on Assets (ROA), both of which shifted from positive levels—ROE peaking at 19.80% and ROA at 7.56% in 2017—to deep negatives in 2020, reaching -19.54% and -6.65% respectively.
- Recovery and Trend Synthesis
- A strong rebound is evident in the 2021 results, with net profit margin returning to 8.87% and ROE recovering to 15.64%. Despite this recovery, most profitability indicators remain below their 2017 peaks. The divergence between the relatively stable operating margin and the extreme swing in net profit margin during 2020 suggests that the losses in that year were driven by non-operating items rather than a fundamental collapse in core operational efficiency.
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Gross Profit Margin
Ecolab Inc., gross profit margin 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) | ||||||
| Gross profit | 5,117,300) | 4,884,400) | 6,182,900) | 6,042,300) | 6,433,200) | |
| Net sales | 12,733,100) | 11,790,200) | 14,906,300) | 14,668,200) | 13,838,300) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 40.19% | 41.43% | 41.48% | 41.19% | 46.49% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Linde plc | 43.03% | — | — | — | — | |
| Sherwin-Williams Co. | 42.83% | — | — | — | — | |
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
Gross profit margin = 100 × Gross profit ÷ Net sales
= 100 × 5,117,300 ÷ 12,733,100 = 40.19%
2 Click competitor name to see calculations.
The analysis of gross profitability reveals a general downward trajectory over the five-year period from 2017 to 2021, characterized by an initial sharp decline followed by a period of relative stabilization and a final marginal decrease.
- Gross Profit Margin Trends
- The gross profit margin experienced a significant reduction between 2017 and 2018, falling from 46.49% to 41.19%. This represents a contraction of approximately 530 basis points. Following this decline, the margin remained relatively stable between 2018 and 2020, fluctuating within a narrow range of 41.19% to 41.48%. However, a further decrease to 40.19% was observed by the end of 2021, marking the lowest margin point in the analyzed period.
- Revenue and Profit Correlation
- Net sales trended upward from 2017 to 2019, peaking at US$ 14,906,300 thousand. Despite the growth in sales during this window, gross profit decreased from US$ 6,433,200 thousand in 2017 to US$ 6,182,900 thousand in 2019, indicating that the cost of goods sold grew at a faster rate than revenue. A substantial contraction occurred in 2020, where net sales dropped to US$ 11,790,200 thousand and gross profit fell to US$ 4,884,400 thousand. While both metrics showed signs of recovery in 2021, with net sales increasing to US$ 12,733,100 thousand and gross profit to US$ 5,117,300 thousand, the recovery in profit did not keep pace with revenue growth, leading to the aforementioned margin compression.
- Operational Efficiency Observations
- The stability observed between 2018 and 2020 suggests a period of consistent cost management relative to sales. However, the inability to return to 2017 margin levels suggests a structural shift in the cost of sales or a change in the pricing environment that has fundamentally altered the gross profit profile.
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Operating Profit Margin
Ecolab Inc., operating profit margin 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) | ||||||
| Operating income | 1,598,600) | 1,395,700) | 2,013,800) | 1,947,000) | 2,019,800) | |
| Net sales | 12,733,100) | 11,790,200) | 14,906,300) | 14,668,200) | 13,838,300) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 12.55% | 11.84% | 13.51% | 13.27% | 14.60% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Linde plc | 16.19% | — | — | — | — | |
| Sherwin-Williams Co. | 12.83% | — | — | — | — | |
| Operating Profit Margin, Sector | ||||||
| Chemicals | 14.87% | — | — | — | — | |
| Operating Profit Margin, Industry | ||||||
| Materials | 21.62% | — | — | — | — | |
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
Operating profit margin = 100 × Operating income ÷ Net sales
= 100 × 1,598,600 ÷ 12,733,100 = 12.55%
2 Click competitor name to see calculations.
The analysis of operating profitability between 2017 and 2021 reveals a general compression in margins, characterized by a period of relative stability followed by a sharp contraction and a subsequent partial recovery.
- Operating Profit Margin Trends
- The operating profit margin peaked in 2017 at 14.60% before declining to 13.27% in 2018. A marginal improvement to 13.51% was recorded in 2019, indicating a temporary stabilization of operational efficiency. However, the margin reached a five-year low of 11.84% in 2020, representing a significant decline from the 2019 level.
- Revenue and Operating Income Correlation
- Net sales grew steadily from 2017 to 2019, increasing from US$ 13,838,300 thousand to US$ 14,906,300 thousand. During this period, operating income remained relatively stagnant, which contributed to the initial erosion of the profit margin. A sharp downturn occurred in 2020, where net sales contracted by approximately 20.9% to US$ 11,790,200 thousand, causing operating income to drop to US$ 1,395,700 thousand.
- Operational Recovery
- The 2021 fiscal year shows a positive trajectory in both top-line growth and profitability. Net sales recovered to US$ 12,733,100 thousand, and operating income increased to US$ 1,598,600 thousand. This resulted in an expansion of the operating profit margin to 12.55%, although the efficiency level remains below the thresholds observed between 2017 and 2019.
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Net Profit Margin
Ecolab Inc., net profit margin 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) | |
| Net sales | 12,733,100) | 11,790,200) | 14,906,300) | 14,668,200) | 13,838,300) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 8.87% | -10.22% | 10.46% | 9.74% | 10.90% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Linde plc | 12.42% | — | — | — | — | |
| Sherwin-Williams Co. | 9.35% | — | — | — | — | |
| Net Profit Margin, Sector | ||||||
| Chemicals | 11.22% | — | — | — | — | |
| Net Profit Margin, Industry | ||||||
| Materials | 13.59% | — | — | — | — | |
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
Net profit margin = 100 × Net income (loss) attributable to Ecolab ÷ Net sales
= 100 × 1,129,900 ÷ 12,733,100 = 8.87%
2 Click competitor name to see calculations.
Between 2017 and 2021, the profitability profile of the organization experienced significant volatility, characterized by a period of relative stability, a sharp downturn in 2020, and a subsequent recovery in 2021.
- Net Sales Trends
- Net sales demonstrated steady growth from December 31, 2017, to December 31, 2019, increasing from US$ 13.84 billion to US$ 14.91 billion. A substantial contraction occurred in 2020, with sales falling to US$ 11.79 billion, representing a decline of approximately 20.9% from the previous year. By December 31, 2021, a partial recovery was observed as sales rose to US$ 12.73 billion.
- Net Income Variability
- Net income remained relatively consistent between 2017 and 2019, ranging from US$ 1.43 billion to US$ 1.56 billion. The fiscal year ending December 31, 2020, marked a severe deviation, with the organization reporting a net loss of US$ 1.21 billion. Profitability returned in 2021, with net income recovering to US$ 1.13 billion.
- Net Profit Margin Fluctuations
- The net profit margin maintained a stable range between 9.74% and 10.90% from 2017 through 2019. This stability was interrupted in 2020, where the margin plummeted to -10.22%, reflecting the impact of the net loss against diminished sales. As of December 31, 2021, the margin recovered to 8.87%, though this figure remained below the pre-2020 average of approximately 10.37%.
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Return on Equity (ROE)
Ecolab Inc., ROE 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) | |
| Total Ecolab shareholders’ equity | 7,224,200) | 6,166,500) | 8,685,300) | 8,003,200) | 7,618,500) | |
| Profitability Ratio | ||||||
| ROE1 | 15.64% | -19.54% | 17.95% | 17.86% | 19.80% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Linde plc | 8.69% | — | — | — | — | |
| Sherwin-Williams Co. | 76.50% | — | — | — | — | |
| ROE, Sector | ||||||
| Chemicals | 12.24% | — | — | — | — | |
| ROE, Industry | ||||||
| Materials | 16.54% | — | — | — | — | |
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
ROE = 100 × Net income (loss) attributable to Ecolab ÷ Total Ecolab shareholders’ equity
= 100 × 1,129,900 ÷ 7,224,200 = 15.64%
2 Click competitor name to see calculations.
Between 2017 and 2021, the Return on Equity (ROE) exhibited significant volatility, characterized by relative stability in the early period, a severe contraction in 2020, and a subsequent recovery in 2021.
- Net Income Performance
- Net income remained consistently positive between 2017 and 2019, peaking at 1.56 billion US dollars in 2019. A substantial reversal occurred in 2020, with a reported net loss of 1.21 billion US dollars. Profitability returned in 2021, though the net income of 1.13 billion US dollars remained below the levels observed prior to 2020.
- Shareholders' Equity Trends
- Total shareholders' equity grew steadily from 7.62 billion US dollars in 2017 to 8.69 billion US dollars in 2019. This growth was interrupted in 2020, when equity decreased to 6.17 billion US dollars, correlating with the annual net loss. By the end of 2021, equity recovered to 7.22 billion US dollars.
- Return on Equity (ROE) Analysis
- ROE was maintained within a range of 17.86% to 19.80% from 2017 to 2019, indicating consistent efficiency in generating profits from shareholders' investments. The 2020 net loss resulted in a negative ROE of -19.54%. The 2021 recovery to an ROE of 15.64% demonstrates a return to positive profitability, although this figure indicates a lower efficiency level compared to the 2017-2019 average.
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Return on Assets (ROA)
Ecolab Inc., ROA 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) | |
| Total assets | 21,206,400) | 18,126,000) | 20,869,100) | 20,074,500) | 19,962,400) | |
| Profitability Ratio | ||||||
| ROA1 | 5.33% | -6.65% | 7.47% | 7.12% | 7.56% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Linde plc | 4.69% | — | — | — | — | |
| Sherwin-Williams Co. | 9.02% | — | — | — | — | |
| ROA, Sector | ||||||
| Chemicals | 5.56% | — | — | — | — | |
| ROA, Industry | ||||||
| Materials | 6.65% | — | — | — | — | |
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
ROA = 100 × Net income (loss) attributable to Ecolab ÷ Total assets
= 100 × 1,129,900 ÷ 21,206,400 = 5.33%
2 Click competitor name to see calculations.
The Return on Assets (ROA) for the period between 2017 and 2021 exhibits a pattern of initial stability followed by a significant disruption and a subsequent recovery phase.
- Stability Period (2017-2019)
- During the first three years of the analyzed period, ROA remained consistent, fluctuating within a narrow range between 7.12% and 7.56%. This stability was supported by net income figures that held steady between approximately US$ 1.43 billion and US$ 1.56 billion, while total assets grew incrementally from US$ 19.96 billion to US$ 20.87 billion.
- Fiscal Year 2020 Volatility
- A sharp decline is observed in 2020, where ROA fell to -6.65%. This contraction was driven by a substantial net loss of US$ 1.21 billion. Simultaneously, the total asset base decreased to US$ 18.13 billion, marking the lowest asset level within the five-year window.
- Recovery and Current Standing (2021)
- A recovery in profitability occurred in 2021, with net income returning to a positive US$ 1.13 billion, resulting in an ROA of 5.33%. While the ROA returned to positive territory, it remained below the pre-2020 levels. This relative underperformance compared to the 2017-2019 period is partially attributed to the expansion of the asset base to a five-year peak of US$ 21.21 billion, which increased the denominator of the ROA calculation relative to the recovered net income.
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