Analysis of the Form 10-K | Fiscal year ended December 31, 2025
What does Ecolab sell, to whom, and how does the money reach the shareholder?
Ecolab sells consumable chemistry and the service that keeps it working: detergents, sanitizers, water-treatment and process chemicals, pest elimination visits and contamination-control programmes. The customer is a site that runs every day, such as a hotel kitchen, a quick-service restaurant chain, a dairy plant, a refinery's cooling tower, a paper mill or a pharmaceutical clean room. Of the US$ 16,081.2 mn of 2025 sales, 78.5% is product and sold equipment recognised on delivery, and 21.5% is service and leased equipment recognised over time, a share that has risen from 19.6% in 2023. The company reports four segments, built from seven operating segments that are also its goodwill reporting units.
| Segment (fixed 2025 currency, US$ mn) | FY2025 | Share | FY2024 | FY2023 | Change FY25 |
|---|---|---|---|---|---|
| Global Water | 7,679.9 | 49.3% | 7,483.4 | 7,284.1 | +2.6% |
| Global Institutional & Specialty | 5,962.0 | 38.3% | 5,979.4 | 5,779.4 | (0.3)% |
| Global Pest Elimination | 1,219.2 | 7.8% | 1,140.1 | 1,044.3 | +6.9% |
| Global Life Sciences | 706.1 | 4.5% | 670.5 | 650.8 | +5.3% |
| Corporate | — | — | — | 42.4 | — |
| Total at fixed currency | 15,567.2 | 100.0% | 15,273.4 | 14,801.0 | +1.9% |
The fixed-currency subtotal sits US$ 514.0 mn below reported sales, the gap between management's 2025 budget rates and actual rates. By destination, the United States took 52.7% of sales and Europe 20.4%, with five other regions sharing the remaining 26.9%. No region grew faster than 3.6%, and the full regional table is in the data tables. The company had approximately 48,000 employees at both year ends, more than 25,000 of them in sales and service. The signatories are unchanged (Christophe Beck, Chairman and CEO; Scott Kirkland, CFO); after year end the proxy records that Mr. Beck adds the title of President and two executives become Co-Chief Operating Officers from April 1, 2026.
Follow one sale. A restaurant chain negotiates a multi-year programme for its dish machines at corporate level; Ecolab installs a dispensing system it owns, or leases the machine itself, and its field sales personnel advise on how the products are used. Each delivery of warewashing chemistry (13% of consolidated sales) is a sale recognised when it arrives, often through a third-party foodservice distributor that handles logistics. Out of each dollar, about 55.5 cents leave as cost of sales, mostly for blended raw materials bought from more than 10,000 inputs, the largest about five percent of purchases. About 26.5 cents go to selling, general and administrative expenses, the line that carries much of a workforce in which sales and service employees are the largest group. Rebates and discounts owed back to customers are accrued as a liability (US$ 528.4 mn at year end). To make the sale possible the company had to own the dispensers and monitors (US$ 3,193.1 mn gross), about 100 plants and the service force; what remains is an operating margin of 17.0%.
The evidence for an advantage sits in what the customer pays. Price added two points to 2025 organic growth of three, gross margin moved from 40.2% in 2023 to 44.5%, and no customer or distributor reached 10% of sales in any of the three years. The company describes its markets as led by "a few large companies" in water and by two large competitors in North American life sciences; those are its own statements. Two facts point the other way: multi-year contracts are named as a constraint on "pricing flexibility", and Specialty "remains largely dependent upon a limited number of major QSR chains". Research spending was US$ 202 mn, 1.26% of sales, slightly below the US$ 207 mn of 2024. Customer retention is said to be "aligned with our acquisition assumptions" but is not quantified, so whether the advantage is widening or narrowing cannot be established from the document.
A newcomer reading "global leader in water" would look for the profit in Global Water. Institutional & Specialty earned US$ 1,357.8 mn, 45.6% of segment operating income, on 38.3% of sales, and the segment figures leave the special charges and the amortisation of the Nalco, Purolite and Ovivo intangibles in a Corporate line, whose SG&A was US$ 195.2 mn.
What type of company is this, and where is the case decided?
Ecolab is classified as Solid. Organic sales grew 3% in 2025 and the company's debt is rated A- / A3 / A-, with net debt at 2.0 times the company's EBITDA. It is not a slow grower, although reported sales grew 2.2% and 2.7% in the last two years: the dividend took 39.6% of free cash flow in 2025, while acquisitions and buybacks together took US$ 2,405.1 mn, three times the dividend. The Solid label carries one caveat: margins were not stable over the years presented, and that movement is the subject of the case. Adjusted operating margin went from 13.9% to 18.0% in two years.
The first decisive question is whether the margin step-up is price the customer keeps paying or cost relief that will reverse. It decides the case because the price of the shares capitalises the 2025 margin, and the document attributes most of the gain to "value pricing". It is only partly answerable: the document splits consolidated growth into volume and price and gives segment margin bridges in points, but in two segments it bundles price with lower supply-chain costs and productivity, and it publishes no raw-material cost index. Section 3 goes deep here.
The second is whether the adjusted profit on which management is paid matches the GAAP profit and the cash. Restructuring has been reported as "special" in every year from 2022 to 2025 [K24, K25], the One Ecolab programme nearly doubled its cost estimate, and receivables grew six times as fast as sales. Section 4 goes deep here.
The third is what the 2025 capital bought. The company paid US$ 1,595.7 mn for Ovivo Electronics, of which 69.3% is goodwill, without disclosing its revenue, and repurchased shares at 38.9 times free cash flow per share. Section 8 goes deep here.
The governing pair is price and volume against segment margin. Ecolab publishes no unit volumes, prices per unit or customer counts, so the pair exists only as percentage contributions. The engines, ordered by their share of the US$ 268.6 mn rise in segment operating income, are Institutional & Specialty (57.9%), Global Water (21.1%) and Life Sciences (10.8%); Pest Elimination (10.2%) gets one line. Corporate moved operating income by US$ (341.1) mn and has no pair, because it holds special items and amortisation rather than a volume.
Several measures are mute here. Cyclical normalisation and peak-versus-average multiples do not apply. Backlog and remaining performance obligations are not disclosed. Segment returns on capital cannot be built, since the company states that segment assets and capex are "not available". Unit economics per customer are not published either.
Which lines moved the result, and what moved them?
Management's explanation, in its own order, is five statements. (1) Reported sales rose 2% and organic sales 3%, made of 1% volume and 2% price. (2) Gross margin rose to 44.5% from 43.5%, which "reflected strong value pricing". (3) Adjusted operating income rose 11% as "strong value pricing and improved productivity were partially offset by investments in the business". (4) Reported operating income fell 2%, because special charges of US$ 162.6 mn replaced a net special gain of US$ 183.6 mn in 2024. (5) Adjusted diluted EPS rose 13% to US$ 7.53 while reported diluted EPS fell 1% to US$ 7.28.
| US$ mn | FY2025 | FY2024 | FY2023 | Change FY25 |
|---|---|---|---|---|
| Net sales | 16,081.2 | 15,741.4 | 15,320.2 | +2.2% |
| Cost of sales | 8,930.8 | 8,899.7 | 9,154.9 | +0.3% |
| Gross profit | 7,150.4 | 6,841.7 | 6,165.3 | +4.5% |
| SG&A | 4,257.9 | 4,228.2 | 4,061.6 | +0.7% |
| Special (gains) and charges | 154.9 | (188.9) | 111.4 | n.m. |
| Operating income | 2,737.6 | 2,802.4 | 1,992.3 | (2.3)% |
| Interest expense, net | 241.1 | 282.5 | 296.7 | (14.7)% |
| Provision for income taxes | 454.6 | 439.3 | 362.5 | +3.5% |
| Net income attributable to Ecolab | 2,075.6 | 2,112.4 | 1,372.3 | (1.7)% |
| Diluted EPS (US$) | 7.28 | 7.37 | 4.79 | (1.2)% |
The complete statement, every line and every year with its source, is in Financials → Income statement on this company's page.
Statements (1), (4) and (5) hold against the statements. Gross profit rose US$ 308.7 mn on sales up US$ 339.8 mn, so nine-tenths of the added revenue reached gross profit. Cost of sales was nearly flat, and product cost of sales actually fell 0.5% while product sales rose 1.2%. The swing in special items, US$ 346.2 mn, explains the difference between a 2% fall in reported operating income and an 11% rise in the adjusted figure, except for the US$ 0.5 mn Ovivo adjustment.
Statement (2) holds in direction but is narrower than the segment text. The consolidated paragraph attributes the gross-margin gain to pricing alone. The Institutional & Specialty and Life Sciences bridges name "lower supply chain costs" and "lower delivered product costs" next to price, and for 2024 the company had said the gain came from value pricing "and lower delivered product costs". The document never separates the price the customer paid from the cost the company stopped paying, and that is the gap at the centre of the first decisive question.
The document does not define the two halves of the pair. Read plainly, volume is the change in quantities sold and price the change in what is charged for them, which the company calls value pricing. Both halves come from the MD&A sales bridge, in whole percentage points, for the consolidated group only; segment bridges give their effect on operating margin, not on sales. They can be computed for 2025 alone, because the 2024 components are marked "not meaningful" after the segment recast. Consolidated, three points of organic growth split into two of price and one of volume, so about two-thirds of the growth came from charging more; the components are whole points and the company notes they "do not necessarily sum due to rounding".
Institutional & Specialty moved the most. Fixed-currency sales were flat at US$ 5,962.0 mn because the organic calculation removes US$ 217.5 mn of 2024 sales for acquisitions and divestitures, which include the surgical business sold in August 2024. Organic sales rose 3%, with Specialty at +5% despite "non-strategic, low margin business exits". The segment's operating margin went from 14.8% in 2023 to 20.1% and then 22.8%. The 2025 bridge gives 4.3 points from "value pricing, lower supply chain costs and improved productivity" against 1.0 point of investment. The mechanism the document describes is a programme rather than a product: dispensing and monitoring systems developed by the segment, lease programmes that bundle dishwashing machines with detergents and maintenance, and contracts negotiated with chains at corporate level. The document shows no price or volume per site, so how far that structure supports price cannot be measured. Segment cost of sales fell 4.9% on sales down 0.3%, a part of which the divestiture explains; the document does not say how much.
Global Water added the most sales but less margin. Organic growth was 2%, made of Light & Heavy +2% (double-digit growth in data centres and microelectronics offsetting soft basic industries), Food & Beverage +4% and Paper (3)%. Margin rose only from 16.1% to 16.5%, with 1.1 points of price against 0.9 points of investment. The pricing line adds 1.1 points here, against 4.3 points for the bundle of price, supply chain and productivity in Institutional & Specialty, which is consistent with industrial customers under "soft end-market demand"; the document gives no more than that. The segment's operating income rose US$ 56.7 mn, of which US$ 10.1 mn is attributed to acquisitions and divestitures.
Life Sciences recovered rather than expanded. Its margin fell from 18.3% to 13.7% in 2024 on "higher supply chain costs" and returned to 17.1% in 2025, with 5.9 points from price, volume and "lower delivered product costs" against 2.2 points of investment including performance-based pay. Part of the 2025 gain is therefore the reversal of a 2024 cost, not new price. Pest Elimination grew organic sales 6% and lifted its margin from 18.4% to 19.4%, with 3.7 points of price and volume against 3.1 points of investment in the business.
The company does not publish price by segment in percent, volume by segment, the raw-material cost change, or the split of the 4.3 points among price, supply chain and productivity. Without those, the pair can be measured but not decomposed below the segment.
On organic and inorganic growth, acquisitions and divestitures took one point off fixed-currency growth. In Institutional & Specialty the adjustment removed US$ 217.5 mn of sales and US$ 52.9 mn of operating income from the 2024 base. In Global Water, acquisitions and the supply sales to ChampionX, which the company treats the same way, accounted for US$ 80.2 mn of 2025 sales. Ovivo, owned for 16 days, contributed US$ 3.7 mn of sales and an operating loss of US$ 0.5 mn. On scalability, sales grew 2.2% against cost of sales at 0.3%, SG&A at 0.7% and depreciation at 5.9%; the operating leverage in 2025 came from gross margin, not from overheads.
Below operating income, net interest fell US$ 41.4 mn, which the company attributes to lower rates and a higher average cash balance. Over the same year the notional of cross-currency swaps, which exchange dollar payments for euro, yuan and Canadian dollar payments, grew from US$ 2,745 mn to 4,151 mn, and their interest is booked in the same line; the document does not quantify that effect. The reported tax rate was 17.8%, against an adjusted 20.2%.
Read together, the year is a margin year: almost all added revenue fell to gross profit, and the segment that sells programmes through owned equipment captured most of it. How much of that is price that stays, and how much is cost that went away, is the one thing the document does not split.
Is the profit cash, and does it belong to the shareholder?
Operating cash flow of US$ 2,952.6 mn starts from net income of US$ 2,093.3 mn including minority interests. Non-cash charges add US$ 1,128.3 mn, of which depreciation and amortisation are 976.4 and share-based compensation 136.6. Smaller accruals and a deferred-tax credit make up the rest. Pension contributions above expense take a net US$ 62.8 mn out. Working capital absorbed US$ 206.2 mn. Receivables took 185.9 and other liabilities 208.0, while inventories, other assets and payables released 187.7 between them. Free cash flow, the company's definition of operating cash flow less capex, was US$ 1,904.3 mn against 1,819.4 in 2024.
Owner earnings are defined here as net income plus non-cash components, less capex, less working capital absorbed, keeping share-based compensation as a cost. On that basis they were US$ 1,767.7 mn with working capital and US$ 1,973.9 mn without it, and the judgement uses the first figure. They sit US$ 136.6 mn below free cash flow because free cash flow adds back the shares paid to employees and owner earnings do not.
The first question is how much of operating cash flow is other people's money held temporarily. In 2025 the answer is none: payables and other liabilities together drained US$ 140.3 mn, minus 7.4% of free cash flow. In 2024 the same two lines had supplied US$ 462.7 mn, 25.4% of that year's free cash flow. The rise in free cash flow in 2025 therefore came despite working capital, not from it. The MD&A describes a "$120 million unfavorable change in working capital", a figure that matches receivables, inventories and payables only (US$ (81.8) mn against 37.7). The US$ 370.7 mn swing in "other liabilities" is not explained anywhere in the document.
The second question is how far taxes paid sit from the tax charge. Cash taxes were US$ 548.1 mn against a provision of 454.6, so the company paid US$ 93.5 mn more than it booked; in 2024 the gap was 208.1. The provision is lowered by a deferred benefit of US$ 36.2 mn and by discrete benefits of US$ 57.5 mn, of which 21.5 came from recognising deferred tax attributes. The rate of 17.8% against the statutory 21% rests mainly on foreign tax credits, worth 7.2 points. Pre-tax income was booked US$ 1,815.3 mn in the United States and US$ 732.6 mn abroad, after a recast that the note describes as "before intercompany eliminations"; with 47% of sales outside the U.S., where profit is booked depends on intercompany pricing that the document does not detail. The company expects the 2025 U.S. tax law to change "the timing of U.S. cash taxes", without a figure.
The third question is whether capex covers all the capacity the company acquired. Capex of US$ 1,048.3 mn includes capitalised software. Outside it, new operating leases added US$ 152.5 mn of right-of-use assets (US$ 336.0 mn in 2024), and finance leases and other borrowings rose from US$ 22.7 mn to 131.4, a line that includes any drawings on a secured construction loan facility in China. Capacity obtained in 2025 was therefore about US$ 1,200.8 mn including the new leases, 14.5% more than reported capex. The document gives no purchase commitments, stating that there are no other "significant unconditional purchase obligations".
The accounting choices that move profit are concentrated in special items. Adjusted figures exclude special (gains) and charges, discrete tax items and, in 2025, Ovivo. Special charges excluding the line for the surgical sale were never below US$ 123.6 mn in any year presented. Over 2023-2025 they summed to US$ 439.9 mn, equal to 21.2% of 2025 net income. A restructuring programme has been running in every year presented: the Combined Program cost US$ 184.1 mn through 2024, and One Ecolab now expects US$ 425 mn of charges through 2027 against the US$ 225 mn announced a year earlier. Adjusted earnings do include acquisition amortisation (US$ 303.8 mn), which is excluded only for Ovivo. The pension assumptions are a further choice, treated in section 7.
The early-deterioration comparisons, each as the growth of the item against the growth of its driver:
| Comparison (FY2025) | Item growth | Driver growth | Gap |
|---|---|---|---|
| Inventories vs sales | +1.7% | +2.2% | (0.4) pt |
| Net receivables vs sales | +13.4% | +2.2% | +11.3 pt |
| Allowance and other accruals vs gross receivables | (4.7)% | +12.7% | (17.3) pt |
| Accounts payable vs cost of sales | +14.4% | +0.3% | +14.1 pt |
| Capitalised software (gross balance) vs SG&A | +13.4% | +0.7% | +12.7 pt |
| Sales vs operating cash flow | +2.2% | +4.9% | none |
Four gaps exceed five points. The software comparison uses the growth of the gross balance, which includes translation, because the document does not disclose the amount capitalised in the year. The receivables gap is partly mechanical: Ovivo brought US$ 79.4 mn of receivables against US$ 3.7 mn of sales, and year-end translation lifted foreign balances. Stripping both, the cash-flow change in receivables was 6.5% of the opening balance, still 4.3 points ahead of sales. Days of sales rose from 66.4 to 73.8, or 72.0 without Ovivo.
The allowance gap has two parts. The ratio of "allowance for expected credit losses and other accruals" to gross receivables fell from 4.99% in 2023 to 4.10% and then 3.47%. Holding the 2024 ratio would have meant a balance US$ 21.2 mn higher; this is arithmetic on the document's figures, not an estimate of an error. The credit-loss allowance alone grew 5.9%, and bad-debt expense of US$ 51.4 mn exceeded write-offs of 48.5, so the decline is not a release of the bad-debt reserve. It sits in the allowance for credits on pricing and quantities, which went from US$ 72 mn to 53 and then 43 and is booked against revenue; the document gives no roll-forward, so a lower balance cannot be read as either fewer credits granted or credits already paid out.
The payables gap is mostly acquisition and timing: the cash-flow change in payables was only +3.7%, Ovivo brought US$ 262.0 mn of current liabilities that are not split, and supplier finance obligations reached US$ 61.2 mn. In the other direction, accrued discounts and rebates owed to customers rose 16.9% to US$ 528.4 mn on sales up 2.2%. A rebate liability growing almost eight times faster than sales means more of the gross price is being given back, or paid later; the document does not say which, and does not separate Ovivo's share.
Working capital and reserves explain none of the rise in free cash flow. Owner earnings equal 0.84 times net income including minority interests and were reached without help from suppliers. The questions left open are receivables and the unexplained outflow in other liabilities, not the cash itself.
What stands in front of the shareholder, and what is it worth?
Five assets exceed 5% of the US$ 24,696.3 mn total. Goodwill (37.4%) and other intangibles (14.9%) come first; property and equipment, receivables and inventories follow, each treated below. On the other side, long-term debt is 29.8% of liabilities and equity, payables 8.4% and other current liabilities 7.0%, with equity at 39.7%.
Goodwill of US$ 9,227.0 mn rose by US$ 1,105.4 mn for Ovivo and US$ 191.2 mn of translation. It sits 5,505.5 in Water, 2,490.4 in Life Sciences, 1,041.5 in Institutional & Specialty and 189.6 in Pest. The 2025 test, a discounted cash flow for each of the seven reporting units, found fair value above carrying value "by a significant margin" for every unit, with no figure. Life Sciences holds 27.0% of goodwill and produced 4.1% of segment operating income, US$ 120.7 mn at fixed currency. Other intangibles of US$ 3,688.5 mn are the Nalco trade name (1,230.0, never amortised, never impaired) and amortising customer relationships, technology and trademarks, net 2,458.5. Amortisation is expected at US$ 338 mn in 2026 and 215 in 2027, a fall of 123 that the document does not attribute to any asset. The capitalisation policy is plain: internal and external software costs are capitalised, and certain dispensing systems are capitalised and depreciated as a pooled mass asset.
Property and equipment of US$ 4,276.6 mn net is US$ 9,116.2 mn at cost. The largest class is dispensing and monitoring equipment at customer sites (3,193.1), ahead of machinery, buildings and capitalised software (1,176.8). Accumulated depreciation is 53.1% of cost, against 54.6% in 2023, a fall consistent with capex outrunning depreciation. Inventories of US$ 1,490.4 mn are 30% on LIFO, with a LIFO reserve of 92.0 that shrank by 12.7 during the year; finished goods were flat. Receivables are discussed in section 4.
Deferred tax assets of US$ 1,244.5 mn after a valuation allowance of 90.8 depend on future income for their carryforward components, losses of 189.8 and credits of 132.2. Within other current liabilities, rebates (528.4) are the largest item, followed by dividends payable and contract liabilities (173.0). Non-current "other liabilities" rose from US$ 366.2 mn to 518.7 without a breakdown beyond the US$ 53.9 mn of unrecognised tax benefits they contain.
Cash was US$ 646.2 mn, of which 476 held outside the U.S.; no restricted cash is disclosed, so net debt of US$ 7,590.1 mn uses the whole balance. Debt of US$ 8,236.3 mn is fifteen senior unsecured public notes, finance leases and other borrowings of 131.4, commercial paper of 100.0 and notes payable of 11.0. Operating leases (present value US$ 761 mn) are kept outside debt in this report. Maturities are US$ 759 mn in 2026, 1,005 in 2027 and 1,012 in 2028. The notes due in 2026-2027 carry coupons of 1.65% to 3.25%, while the 2025 issues carry 4.30% and 5.00%. The fair value of long-term debt, US$ 7,381.8 mn, is below carrying value, which is consistent with coupons below current market yields; the document does not explain the gap. The US$ 2.0 bn revolving facility was extended to 2030 and is undrawn; covenants are met, but their metrics are not disclosed.
Working capital in days uses year-end balances over 365 days, with cost of sales as the base for inventories and payables.
| Days | FY2025 | FY2024 | FY2023 |
|---|---|---|---|
| Receivables | 73.8 | 66.4 | 67.5 |
| Inventories | 60.9 | 60.1 | 59.7 |
| Payables | 84.6 | 74.2 | 62.4 |
The 22-day lengthening of payables over two years has financed the six-day lengthening of receivables with room to spare. Inventory days barely moved, so the cash cycle shortened even as receivable days lengthened.
Equity of US$ 9,770.8 mn attributable to Ecolab carries US$ 9,079.6 mn of treasury stock and an accumulated loss of US$ 1,874.3 mn in other comprehensive income, mostly translation (1,374.8) and pensions (495.5). Return on average equity was 22.4%; adding back treasury stock, it falls to 11.6%, because buybacks have shrunk the denominator by almost half. Retained earnings rose by US$ 1,316.9 mn, which is net income less dividends declared; read alone that figure says little, since a company that returns more retains less without being worse. Net interest absorbs 8.8% of operating income, and long-term debt equals 3.55 years of current net income.
Of total assets, 52.3% is goodwill and intangibles measured on management's estimates made at acquisition, against 2.6% in cash and 13.2% in receivables close to an observable value.
Tangible equity is negative at US$ (3,144.7) mn, (11.15) per share. Net working capital is US$ 420.9 mn and the current ratio 1.08, down from 1.26. Cash is US$ 2.29 per share, and cash net of gross debt is US$ (26.92) per share. If sales stopped growing and the GAAP operating margin returned to the 15.9% average of 2023-2025, none of these balances would protect the shareholder: the only protection would be the earnings stream itself.
Does the capital earn, and does the shareholder receive it?
| Per diluted share (US$) | FY2025 | FY2024 | FY2023 |
|---|---|---|---|
| Sales | 56.39 | 54.92 | 53.47 |
| Diluted EPS | 7.28 | 7.37 | 4.79 |
| Free cash flow | 6.68 | 6.35 | 5.71 |
| Equity | 34.26 | 30.56 | 28.08 |
Free cash flow per share rose 5.2% in 2025 while EPS fell 1.2%, because the 2024 EPS was lifted by the gain on the surgical sale. The diluted count fell from 286.5 mn to 285.2 mn, so each per-share figure grew slightly faster than its total: the shareholder has not been diluted.
Return on invested capital is built here as operating income taxed at each year's effective rate, over the average of equity plus debt minus cash. It was 13.8% in 2025 and 15.3% in 2024, or 14.7% and 14.3% on adjusted operating income; with three balance sheets these are two points, not a trend. The incremental return from 2023 to 2025 was 32.4%: operating profit after tax rose by US$ 668.3 mn on US$ 2,060.1 mn of added capital. From 2024 to 2025 alone it was 9.2% on adjusted figures, because the US$ 2,297.3 mn of capital added that year is mostly Ovivo, which had produced nothing yet.
The reinvestment rate, net capex plus acquisitions plus working capital over adjusted after-tax operating profit, was 93.1% in 2025 because of Ovivo. Without acquisitions it was 24.4%, which at the adjusted 14.7% return implies organic growth of 3.6%. The company reports organic operating income growth of 13%. The difference did not come from reinvestment: it came from price and margin on capital already in place. That joins return and distribution. The company returned 74.1% of 2025 net income as dividends and buybacks and reinvested organically about a quarter of its after-tax operating profit, so the high return on existing capital is being collected, not compounded. In 2025 the retained portion went mostly into one acquisition.
Over 2023-2025 the company financed itself. Cumulative free cash flow of US$ 5,360.7 mn, topped up by the surgical sale and option exercises, covered dividends, buybacks and acquisitions. Net debt flows over the period were a repayment of US$ 660.8 mn; the line-by-line sources and uses are in section 8.
Capital intensity rose. Capex was 1.56 times depreciation in 2025, against 1.26 in 2023. Construction in progress rose 26.3% to US$ 858.1 mn, and the risk factors tie part of this to "new capacity in our Life Sciences business". Cumulative capex was 50.7% of cumulative net income. The document does not separate maintenance from growth capex; using depreciation as a stand-in for maintenance, a company that stopped growing would generate about US$ 2,280.0 mn a year before working capital. The company describes its growth investments mainly as operating expenses, and SG&A is 26.5% of sales against capex at 6.5%.
Multiples use the closing price of US$ 262.52 on December 31, 2025, the last trading day of the fiscal year, and 281,969,448 shares, both supplied with the request; the share count is the same one the 10-K cover gives as of January 30, 2026. The resulting market value is US$ 74,022.6 mn and the enterprise value US$ 81,646.4 mn. At that price the shares trade at 36.1 times diluted EPS (34.9 times adjusted) and 40.5 times the three-year average EPS. They trade at 38.9 times free cash flow and 21.7 times the company's EBITDA, and at 7.6 times book value. The new quarterly dividend gives a yield of 1.11%.
A buyer of the whole company at this price would receive operating income equal to 3.35% of enterprise value before taxes and financing, or 3.55% on the adjusted figure. A buyer of the shares receives 2.57% of the price in current free cash flow, so the price equals close to 39 years of the 2025 cash flow per share.
Which notes change the reading, and by how much?
The pension obligation is the only Critical Audit Matter: the auditor singled out the projected benefit obligation of the U.S. qualified plan, US$ 1,738 mn, and specifically the discount rate. Its weight is smaller than its status. U.S. plans are underfunded by only US$ 73.1 mn, international plans by 231.9 and retiree healthcare by 98.8, a net US$ 403.8 mn, 4.1% of equity. The discretion lies in the discount rate, cut from 5.58% to 5.28%, and in the expected return of 8.25%, raised for a second year. U.S. plan assets hold 14% in private equity against a 6% target, and US$ 321.7 mn of them are measured at net asset value rather than in the fair-value hierarchy. The expected return also lowers expense: by the company's sensitivity, a quarter point is worth about US$ 4.4 mn a year. By the company's sensitivity, each quarter-point fall in the discount rate adds US$ 33.1 mn to the obligation and US$ 2.5 mn to 2026 expense, so the exposure is to rates, and modest.
Goodwill and the Ovivo allocation carry the largest judgement. Goodwill and intangibles together are 52.3% of assets, tested with discounted cash flows whose growth rates, terminal values and discount rates are not disclosed, and whose headroom is described only as "significant". Ovivo's allocation is preliminary for tangible assets, intangibles, pensions, tax attributes and goodwill. It includes US$ 117.4 mn of contract assets, which are revenue recognised before billing; these are new to the group, since contract assets were immaterial in 2024, and the document does not describe Ovivo's revenue recognition. The same note that cites seven reporting units refers once to "eight reporting units", an inconsistency the document does not resolve. What would move these balances is a reporting unit whose cash flows fall short of the acquisition case; Life Sciences, whose goodwill is 20.6 times its segment operating income (section 5), is where that ratio is highest.
The tax note contains three judgements. Unrecognised tax benefits rose from US$ 34.1 mn to 53.9, of which 9.0 came with acquisitions, and 50.6 would lower the rate if recognised. The company booked for the first time a deferred tax liability of US$ 100.1 mn on undistributed foreign earnings, alongside a deferred tax asset of 72.2, so some foreign earnings are no longer considered permanently reinvested. It also discloses US$ 1.5 bn of Luxembourg tax losses not recognised because their use is "remote". The tax-free status of the 2020 ChampionX split-off rests on counsel's opinions, without an IRS ruling, and no exposure is quantified.
The TPC Group litigation is the one open lawsuit the note describes. Nalco faces claims from more than 5,000 plaintiffs over a 2019 plant explosion, settled with "a portion" of them in July 2025 for an undisclosed amount, and the company states that "any estimate of any further loss or range of losses cannot be made at this time", while expecting insurance cover above deductibles.
The notes move the reading in one direction: the estimates that matter are on the asset side, in goodwill and acquired intangibles tested without disclosed headroom, while the liabilities flagged by the auditor are small against the earnings.
What did management do with the money, and do they say so when it goes wrong?
No shareholder controls the company. William H. Gates III holds 12.18% through Cascade Investment and the Gates Foundation Trust, and Cascade's business manager, Michael Larson, sits on the board; Vanguard reports 8.21% and BlackRock 7.69%, both on filings that describe holdings at the end of 2023 [PX]. The roles of Chairman and CEO are combined, and from April 2026 Mr. Beck is also President. PricewaterhouseCoopers has audited the company since 1970, and the proxy reports no related-person transactions since the beginning of 2025. Directors and executive officers beneficially own 1,325,765 shares, 0.5%, but 1,068,005 of those are options or units exercisable within 60 days; of Mr. Beck's 518,078 shares, 424,087 are options. The holdings are therefore mostly compensation awards; the proxy does not say how the remaining shares were acquired.
Over 2023-2025 operating cash flow of US$ 8,178.3 mn was the dominant source; the surgical sale (874.8 net) and option exercises (584.4) were the others, and debt was repaid on balance. The uses were capex 2,817.6, acquisitions 2,114.6, dividends 2,035.2 and buybacks 1,784.0. The composition changed in 2025: acquisitions of US$ 1,621.3 mn became the largest single use for the first time in the three years, larger than capex.
Ovivo Electronics is that decision. The company paid US$ 1,595.7 mn in cash on December 16, 2025, equal to 6.5% of total assets, 16.3% of equity and 54.0% of the year's operating cash flow. Of the price, US$ 1,105.4 mn is goodwill, 618.3 is intangibles amortised over a weighted 17 years, and net tangible assets are negative by 128.0. The document justifies the purchase in words ("a leading and fast-growing global provider of breakthrough ultrapure water technologies") and does not disclose its revenue, margin or the return expected; pro forma information is omitted because acquisitions were "not significant". The document does not state the result of the acquisition, and at this size that is the main gap in the year's capital allocation. The document says the US$ 1.0 bn of 2025 notes went to general purposes "which included partial funding" of Ovivo; cash fell by US$ 610.6 mn. Of earlier deals, the surgical business was sold in 2024 for US$ 926 mn received at closing and a gain of 355.9; Purolite's goodwill sits in Life Sciences without impairment; Barclay's US$ 262.2 mn accounting was finalised.
The company reacquired 2,994,702 shares in 2025, including 109,938 withheld for taxes, at a cost of US$ 777.2 mn. The average of US$ 259.52 is just below the year-end close of 262.52, while fourth-quarter purchases averaged 263.91, above it. That average is 38.9 times 2025 free cash flow per share, so each dollar of buyback bought 2.57 cents of current free cash flow; in 2024 the multiple was 36.9 and the yield 2.71%. In the same year the company borrowed at higher rates than that yield (section 5). Buyback spending fell from US$ 996.1 mn in 2024 to 777.2 as the multiple rose, but two years cannot show whether spending follows the multiple.
The company issued 1,662,520 shares for compensation, new and from treasury, against 2,994,702 reacquired. The buyback covered the issuance and reduced the count by a net 1,332,182 shares, 0.47%, so it did return capital, but 55.5% of the shares bought only offset those handed to employees. The same year, 1,414,518 options were exercised at an average US$ 172.62 while the company bought shares back at 259.52: it sold stock to employees at two-thirds of the price at which it repurchased it.
Measured over all the years presented, the adjustments net out. Adjusted net income summed to US$ 5,548.4 mn over 2023-2025, GAAP net income to 5,560.3. The adjusted series is smoother, however. Adjusted EPS rose in both years to US$ 7.53, while GAAP EPS jumped to 7.37 in 2024 and slipped to 7.28. The 2024 adjusted figure removed a net special gain of US$ 183.6 mn before tax and the 2025 figure removed charges of 162.6, so the gain in one year and the charges in the next turn a falling GAAP EPS into 13% growth. Restructuring labelled special appears in every year: US$ 184.1 mn for the Combined Program through 2024, and a One Ecolab plan whose expected charges nearly doubled within twelve months (section 4). The discrete tax items excluded were net benefits of US$ 124.9 mn over the three years, an exclusion that lowers adjusted profit.
The annual incentive is paid on adjusted EPS. The 2025 target was US$ 7.27, with a minimum of 6.85 [PX]. The actual 7.53 produced a 137% payout, just below the 140% level set at 7.55. Applied to GAAP diluted EPS of 7.28, the same schedule would give about 101%; this is our construction on the proxy's figures. The share awards are paid on an adjusted return on capital that excludes Nalco and Purolite purchase accounting and special charges; for the 2026-2028 cycle the measure is organic ROIC, whose invested capital "is not adjusted for acquisitions completed prior to the start of the performance period", so Ovivo will count in it. The annual bonus is therefore measured after removing the same special charges and discrete tax items that the adjusted figures remove, while the 2026 share awards will carry the Ovivo capital.
Governance signals inside the documents are clean: internal control effective, no restatement, no auditor change, no Rule 10b5-1 plans adopted in the fourth quarter, pledging prohibited. The proxy records two late Section 16 filings, and an ERP upgrade continues in phases.
Taken together, the year's decisions point the same way. The company issued US$ 1.0 bn of notes, spent 1.6 bn on one purchase and repurchased stock. It raised the dividend 12%, to a rate worth US$ 823.4 mn a year on the current share count, and expanded a restructuring aimed at US$ 325 mn of annual savings. It also enlarged its cross-currency swaps by half (section 3) and stopped treating part of its foreign earnings as permanently reinvested. Net debt to EBITDA went from 1.7 to 2.0 and cash fell by US$ 610.6 mn: the balance sheet took on leverage to buy a semiconductor water business while the dividend went up. Next year's filing will carry the cost of all of it in the same statements: a full year of Ovivo amortisation inside the 338 expected, interest on the new notes, the next One Ecolab charges and US$ 759 mn of maturities.
On candour, the segment text does admit shortfalls: Paper sales declined 3%, basic industries fell, hospital sales were "modestly lower", Specialty exited low-margin business, and the 2024 discussion records "a fourth quarter spike in accidents" in Pest and "higher supply chain costs" in Life Sciences. The headline language is less exact. The executive summary claims "record sales, operating income margin, adjusted diluted earnings per share, and free cash flows"; the record margin is the adjusted 18.0%, since the reported margin fell from 17.8% to 17.0%. The CEO letter in the proxy goes further, citing "record sales, earnings per share, operating income margins and free cash flow", while reported EPS fell from US$ 7.37 to 7.28. Both claims can be checked only against 2023-2025, the years presented. The doubling of the One Ecolab cost estimate is presented as an expansion of the programme, with a larger savings target, not as an overrun, and no reason is given for the larger scope.
What would have to happen for capital to be lost permanently here?
Compared with the prior filing, one risk factor is new: "Our operations may present a safety risk to our employees and others", following the 2024 collision and the accident spike in Pest. The artificial-intelligence risk has been moved ahead of the IT-systems and raw-material risks. The tariff paragraph has moved from proposed to imposed measures. The goodwill risk now cites Ovivo, the ERP risk adds the possibility of business disruption, and stated indebtedness rose from US$ 7.6 bn to 8.2 bn. No risk factor heading was removed.
Three mechanisms could produce a permanent loss within three years. First, the margin reverts: if price stops adding two points and cost relief reverses, the adjusted operating margin moves back toward the 13.9% of 2023 from 18.0%. The signal would be the price component of the sales bridge and the gross margin in the next filing. Second, the price paid is not earned: at the 2.57% cash yield of section 6, a margin that merely stays where it is leaves the purchase price resting on the multiple rather than on the cash. The signal would be free cash flow per share, US$ 6.68 today. Third, acquisitions are written down: with goodwill at 37.4% of assets and Ovivo's return undisclosed, an impairment in Life Sciences or Light & Heavy would confirm that capital was paid for cash flows that did not arrive. The signals would be the goodwill test disclosure and the margins of those two units.
What did management promise, and what became of it?
Six catalysts are anchored in the document. One Ecolab targets US$ 325 mn of annual savings by 2027, against US$ 119 mn delivered so far. Acquisition amortisation is expected to fall from US$ 338 mn in 2026 to 215 in 2027. Ovivo will report its first full year. The quarterly dividend is now US$ 0.73. The 2026 maturity is US$ 759 mn. The effects of Pillar Two and the 2025 U.S. tax law on cash taxes are still to be measured.
Against the prior filing, the stated expectations and what happened to them:
| Stated in the FY2024 filing | Realised or restated in FY2025 | Deviation |
|---|---|---|
| One Ecolab charges of US$ 175 mn restructuring + 50 special by 2027 | Raised to 334 + 91; 198.8 + 54.6 booked | Estimate +89% |
| One Ecolab savings of US$ 140 mn annualised by 2027; 12 delivered | Target 325; 119 delivered | Target +132% |
| 2025 intangible amortisation US$ 293 mn | 304 actual, including 2025 acquisitions | +11 |
| 2025 international pension contributions about US$ 48 mn | 32.2 contributed to international plans | (15.8) |
| 2025 debt maturities US$ 612 mn | €575 mn repaid, US$ 674 mn | +62, currency |
| 2025 incentive target adjusted EPS US$ 7.27 [PX] | 7.53 | +0.26 |
With no earlier 10kvi coverage of the company, the comparison is with the prior filing. The catalysts are mostly the company's own programme; none of them controls the price customers will pay, which is where the case is decided.
Each of the three decisive questions now has an answer, and each answer holds under a condition that a line of the next filing will test.
On the first question, the margin step-up is real and mostly price, but not only price. Two-thirds of 2025 organic growth was price, and nine-tenths of the added sales reached gross profit; the Institutional & Specialty margin went from 14.8% to 22.8% in two years on fixed-currency sales up 3.2%. The segment bridges, however, credit supply-chain and delivered-cost relief alongside price, and Life Sciences' 2025 gain partly reverses its 2024 cost problem. The reading that the margin is durable holds if next year's sales bridge still shows a positive price component while the gross margin stays near 44.5%. It fails if the price component falls to zero and the gross margin with it, or if accrued rebates keep outgrowing sales; the sales bridge, gross margin and the rebates line will show it.
On the second, the cash confirms the profit in 2025: free cash flow rose without any help from suppliers or customer prepayments. The adjusted profit is a different matter. Over three years adjustments net to almost nothing, but year by year they converted a falling GAAP EPS into 13% growth, and the bonus was paid on the adjusted figure. Restructuring has been "special" every year and is planned to remain so through 2027. The reading that adjusted earnings represent the business holds if One Ecolab ends within its US$ 425 mn and the savings reach the operating margin. It fails if special charges continue beyond 2027 or the estimate is raised again; Note 3 will show it, together with receivables and the other-liabilities line.
On the third, the 2025 capital bought assets whose return the document does not state. Ovivo's price is mostly goodwill, with no revenue disclosed; the buybacks bought a 2.57% cash yield while new debt cost up to 5.00%. The reading that the capital was well spent holds if Global Water's growth and margin absorb Ovivo's amortisation and interest, and if goodwill tests continue to pass. It fails if Light & Heavy or Life Sciences require an impairment or if the next filing still does not disclose what Ovivo earns; the segment table and Note 4 will show it.
The case rests on one number the document does not split, price against cost, and on one purchase whose return it does not state; everything else in the filing is consistent with a business that earns well on capital it already has.
What next year's filing will settle
- Price component of organic sales growth — today +2 points of +3. It answers whether the margin is price that stays (question 1).
- Gross margin and the Institutional & Specialty fixed-currency margin — today 44.5% and 22.8%. They show whether the step-up survives a year without new cost relief (question 1).
- Special (gains) and charges and cumulative One Ecolab charges — today US$ 162.6 mn and 253.4 of 425. They show whether "special" restructuring ends on the stated schedule (question 2).
- Receivables, the allowance and other accruals, and the other-liabilities line in cash flow — today US$ 3,249.4 mn, 116.8 and (208.0). They show whether the 2025 gaps were acquisition and timing (question 2).
- Global Water sales and margin, Ovivo's final purchase allocation and goodwill tests — today US$ 7,679.9 mn, 16.5%, and goodwill of 1,105.4 preliminary. They show what the 2025 capital earns (question 3).
Based on Ecolab Inc.'s Form 10-K for the fiscal year ended December 31, 2025, signed and dated February 23, 2026, with the Form 10-K for fiscal 2024 for comparison and the definitive proxy statement for the May 7, 2026 annual meeting. Multiples use the closing price of US$ 262.52 on December 31, 2025 and 281,969,448 shares outstanding, both supplied with the request and not updated. This report is for analysis purposes only and does not constitute investment advice.
The full data table behind this report — every line item with its source in the filing and the arithmetic checks — is published separately: Ecolab Inc. FY2025 data table.