U.S. cleaning and sanitation products major Ecolab Inc (ECL - Analyst Report) has divulged its plans to relocate its German offices and R&D operations from Dusseldorf to a new high-tech innovation center in Monheim am Rhein.
The new location will house the Minnesota-based company’s R&D, engineering as well as local sales and marketing functions. The Monheim am Rhein facility will have a world-class customer innovation center, where Ecolab’s innovative program and service solutions will be featured. The company is expected to commence relocating employees in November 2012. The completion of the move is expected in first-quarter 2013.
The company stated that its move to relocate its German facilities to the new center came at the right time as it celebrates the 50th anniversary of its presence in that country. Moreover, it has noted that the selection of the Monheim am Rhein location was based on its technical capabilities and additional space which will allow it to co-locate major functions.
Ecolab caters products and services to the hospitality, foodservice, institutional and industrial markets across more than 160 countries. The company’s U.S. Cleaning & Sanitizing and International divisions face stiff competition from Clorox (CLX - Analyst Report) and Church & Dwight (CHD - Snapshot Report).
To drive growth, the company continues to invest in strategic areas such as, product innovation, healthcare, water and energy and global pest elimination while rationalizing operating costs.
Ecolab, in February 2011, announced a major restructuring plan for its European business aimed at boosting efficiency and profitability in that operation. As part of this initiative, the company plans to realign its supply chain and prune headcount which will involve elimination of roughly 900 jobs. The restructuring, once completed, has been projected to save more than $120 million annually.
Although we are impressed by Ecolab’s strong international exposure, we remain cautious about aggressive competition, raw material price fluctuations and dilutive impact of the hefty restructuring expenses on the company’s bottom line. We currently have a Neutral recommendation on Ecolab, which is backed by a Zacks #3 Rank (Hold).