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Ecolab Divests Mobotec Equipment Biz

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Leading cleaning and sanitation products maker, Ecolab (ECL - Free Report) has divested a section of its Mobotec business to UK-based The Power Industrial Group. Mobotec is a developer of air protection technologies and was a part of Nalco, which Ecolab acquired in 2011.

Ecolab has sold the capital equipment design and build business but retained the chemical business of Mobotec. However, no further details of the deal were revealed by the company. The Mobotec equipment design and build business had generated sales of $27 million in 2012.

Ecolab serves the foodservice, food and beverage processing, healthcare and hospitality markets across the globe. The company’’s aggressive strategy to pursue acquisitions along with its ability to divest non-core, underperforming assets should intensify its focus on profitable niches. This should encourage investor sentiment.

Earlier, in Dec 2012, Ecolab had disposed the asset of its Vehicle Care division to Atlanta, Ga.-based Zep Inc. for $116.9 million. The company gained $76.3 million ($47.5 million after tax) from the divestment.

Ecolab has a Zacks Rank #2 (Buy). The company reported adjusted earnings per share of 86 cents in the second quarter of 2013, which were 2 cents ahead of the Zacks Consensus Estimate. This result represented a 19% jump from the year-ago earnings on the back of solid top-line growth as well as an improved operating margin. We are impressed by Ecolab’s consistent double-digit earnings growth despite the current challenging business environment.

Revenues grew 13% to $3,337.8 million, a record high for the company. The newly acquired Champion Technologies contributed significantly to the company’s revenues in the quarter. However, revenues were lower than the Zacks Consensus Estimate of $3,410 million.

Ecolab raised its guidance for 2013, which includes the impact of the acquisition of Champion Technologies. It anticipates 2013 adjusted EPS in a range of $3.48−$3.56, representing a rise of 17%−19% in earnings. The current Zacks Consensus Estimate for 2013 is pegged at $3.53, which lies within the guided range.

For third quarter 2013, adjusted earnings are expected in a range of $1.00–$1.05 per share, up 15%–21% year over year. The current Zacks Consensus Estimate of $1.03 remains within the predicted range.

Other companies from the basic materials sector such as Ferro Corp. (FOE - Free Report) , carrying a Zacks Rank #1 (Strong Buy), along with Sensient Technologies Corporation (SXT - Free Report) , carrying a Zacks Rank #2 (Buy), are expected to do well.

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