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Ecolab Inc
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Greetings, and welcome to the Ecolab Second Quarter 2021 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce to you your host, Mr. Mike Monahan, Senior Vice President, External Relations. Thank you, sir. You may begin.
Thank you. Hello, everyone, and welcome to Ecolab's Second Quarter Conference Call. With me today are Christophe Beck, Ecolab's CEO; and Dan Schmechel, our CFO. A discussion of our results, along with our earnings release and the slides referencing the quarter's results, are available on Ecolab's website at ecolab.com/investor. Please take a moment to read the cautionary statements in these materials, which state that this teleconference and the associated supplemental materials include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the Risk Factors section in our most recent Form 10-K and in our posted materials. We also refer you to the supplemental diluted earnings per share information in the release.
Starting with a brief overview, strong second quarter results reflected significant year-on-year sales and earnings growth, driven by recovering markets, accelerating pricing and new business wins, which more than offset increased delivered product costs and the slower pace of reopenings outside the U.S. We've implemented aggressive pricing actions to offset increase over product costs leveraging the strong product and service value we deliver to customers. When combined with our strong new business wins, we expect to once again successfully manage the current inflation challenges and uneven global economic recovery to deliver very strong sales and earnings growth in 2021.
Our position as a leader in food safety, clean water and healthy environments has become even more important in the last 18 months. We believe this position, along with our strong long-term growth opportunities, remain robust driven by our huge remaining market opportunity, our leading global market positions, our focus on providing our strong customer base with improved results while lowering their water, energy and other operating costs and, through that, our ability to help them meet their growing ESG ambitions. We believe that these sustainable long-term business drivers will continue to yield superior long-term performance for Ecolab and our investors.
And now here's Christophe Beck with his comments.
Thank you so much, Mike, and thanks to all of you for joining us today. As expected, Q2 was indeed a very strong quarter for our company. Acquisition adjusted sales rose 12%, driven by the U.S. and China with the reopening of Europe and the rest of the world expected to follow progressively. Adjusted earnings per share ended up a strong 88% over last year. U.S. institutional sales more than doubled in the second quarter versus the same quarter in 2020, clearly outperforming the industry.
The number of restaurants we serve as well as the number of solutions they buy from us ended up almost back to 2019 levels and are growing fast. Both are strong signs of how much business we've gained during the pandemic and the growth potential we have as markets reopen. Industrial accelerated to 3% in Q2, driven by strong new business generated during the pandemic and accelerated pricing.
Water sales were up 7% with light industries up 12% driven by strong momentum in new segments like data centers, which, by the way, grew 53% in the quarter. Paper was up 10% driven by strong demand for our innovative solutions in board and packaging, while food and beverage kept improving. Downstream remained a bit challenged in the quarter as it repositions itself from a focus on operational efficiency toward new promising sustainability offering.
Healthcare and Life Sciences also had very strong and consistent underlying sales growth in Q2 with mid-single and double-digit growth, respectively. Reported sales were only down as they respectively compared to exceptional growth of 13% and 53% in 2020, largely driven by unusual high demands and one timer during the pandemic. And finally the other segments grew 23%, driven by continued strengths of pest elimination, which was up 21% in the quarter benefiting from further market opening and very strong of business. On the margin front things progress very well too which overall margins improving 420 basis points.
Beyond the U.S. institutional recovery, our continued progress benefited from accelerated investment made in digital technology during the pandemic as well as overall pricing that accelerated to 2% in the second quarter. With this backdrop and for the full year, we remain confident of our ability to deliver adjusted earnings that are better than 2019, excluding the Texas raise. How much better is the only question, considering the Delta variant, the timing of your opening in Europe and in the rest of the world as well as the speed and amplitude of the rise of inflation.
More broadly, our longer-term outlook has never been stronger. Our new business and innovation pipelines are at record levels. Our new growth engines like life sciences, health care, high tech and data centers are all very well positioned to drive incremental growth. And our digital capabilities continue to increase customer value, field productivity and customer experience.
Our main focus right now will be to leverage this positive pricing environment to protect and strengthen our margins and do so while further enhancing value for our customers. This is something we've accomplished many times in the past and expect to successfully accomplish once again.
Therefore, we've now embarked on a third round of price increases, which will progressively cover the new rapid rise of input costs that we've seen in Q2 with the biggest impact to be seen in Q4 when we expect pricing to reach 4%. Overall, we feel good about our ability to deliver the second half of '21, even if the pacing between the next two quarters will be slightly different than initially anticipated. We now expect attractive sequential improvement in the third quarter and a more significant one in the fourth as pricing actions will hit the P&L.
And finally, global trends in people health, like infection prevention and food safety; as well as planet health, like water and carbon emissions are becoming front and center for every business leader. And there's no one positioned to help customers on both fronts better than Ecolab while helping them ensure strong and long-term business sales.
In other words, we're strengthening our global position as the natural sustainability partner for our customers. All this, combined with the strengthened highly innovative portfolio, strong business momentum, terrific new wins, accelerated pricing and unique digital capabilities to position us with great momentum for '22 and will contribute to drive continued strong digital -- double-digit earnings growth for the years to come.
With that, I look forward to your questions.
Thanks, Christophe. That concludes our formal remarks. As a final note before we begin Q&A, we plan to hold our 2021 Investor Day on Tuesday, September 14 in St. Paul.
Operator, please begin the question-and-answer period.
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Your first question comes from the line of Tim Mulrooney with William Blair. Please proceed with your question.
Good afternoon, Christophe. Thank you for taking my question. So, okay. So I want to focus on raw materials and price, which probably doesn't surprise you. But in the face of raw material cost pressure, I think your typical formula is to increase price to make up for the dollar amount in year one and then the margin in year two. But in your press release, you said the recent pricing actions you took remain ahead of input costs. So I was hoping you could clarify this language a little bit. If your price minus cost dynamic is currently positive, it sounds like you've already moved past Phase 1, and you're essentially already on Phase 2, which is working to rebuild the margin. Am I reading into that statement incorrectly? Or is that how you would characterize it?
The general direction, Tim, is right. Actually, when I look at the first half of 2021, so I like a lot, where pricing was compared to the input cost. We're usually good at that as well so to begin with. Now what has changed is that the indices, as we've all seen, you've seen that as well, so during the second quarter so have changed for the much higher for the second half. And that has indicated we had to change our pricing plans quite significantly. It's been the third time we've done it over the last 12 months. We've engaged those new plants as well with the whole team. We have indicated that as well to customers and progress is good.
So, we were ahead. Market has changed a little bit, which forced us to change our plans as well. And I feel good right now that we will be in a good place for the second half, both in terms of dollar and progressively improving the margin. And now to that point, it's going to impact mostly Q4, obviously, because it takes some time obviously to agree with customers to get to that new pricing. So we will see a better improvement in Q4 than what we have expected and a lower improvement in Q3 than what we had expected, but overall, so for the second half, basically at the same place as what we had planned initially.
Okay, very clear. And the announcement that you guys gave publicly in a press release, I think that was specifically related to the industrial segments. But presumably, you're also seeing cost pressures in institutional and health care as well. Are you implementing price increases across those divisions as well? Or is this really a conversation about industrial primarily?
We're implementing price increases in every business every year. Tim, this is really a practice that we have coached our teams and our customers for the many past years, as well, really making sure it's not an event, but it's really something that's happening every single year, really driven by the value we create for our customers and not directly driven by the input cost, which is one of the elements, obviously, of the discussion. So you're right, industrial takes the heaviest or biggest part. Because of their cost structure, this is nothing new, and they're really good at it. So, the majority of the price increase is in industrial, but the other businesses are moving up as well at the same time.
Your next question comes from the line of Manav Patnaik with Barclays. Please proceed with your question.
I just had a broad question, which is what do you need to see happen in terms of visibility before you can start giving your detailed guidance like you used to. I was just hoping you could help us through some of the moving pieces maybe beyond just the Delta variants, I suppose.
Yes. Hi, Manav. Good question. So it's all related to the variant Delta or D as it's called out there. As you know, if you look at the past 20 years, we've always delivered within our guidance with the exception of 9/11, unfortunately, so 20 years ago. So for us, the level of assurance and certainty is very high.
And we focus on everything we can control, including questions of price and inflation, as we just discussed. The Delta variant is something that is really unusual, hard to predict as well. So that's the only question mark that we have out there. The clearer things are going to become vaccination rates with how governments and countries are reacting as well out there, well, will bring us closer to us providing as well guidance.
We will get back to that. We like it. It's something that has been good for us and for investors as well at the same time. So we'll get back when time is right. But so far, I'd say if things do not change materially, our directional guidance remains true, and we will firm it up as soon as variant D becomes more clear.
Got it. And just maybe on the margin front, I mean if pricing is ahead of cost and you've obviously learned a lot, I think, in terms of efficiency from the past 15 months or so. So just curious if the incrementals and the incremental margins in the business, should we think of that as getting better or more of the same? Or any color there would be helpful.
Overall, for the second half, it's going to be the same. But obviously, so the input cost has changed quite dramatically and the pricing has changed as well, so quite a bit. We had initially thought for the full year that our input cost would increase kind of mid-single digit. That was the initial plan. The way we look at it for the full year now, so it's closer to double digit numbers, so quite a change. And we've changed pricing as well for that. We did add it as well.
But let's keep in mind as well that in order to get the margins back to where they used to be, we need to double the pricing versus the input costs since we have a gross margin of 50%, so easy math as such. So, overall, good situation in terms of pricing versus input cost. Second half is going to deliver similar improvement than what we had expected. But as mentioned earlier, the pacing between Q3 and Q4 will be different just because we need some time in order to get agreement with customers.
Your next question comes from the line of David Begleiter with Deutsche Bank. Please proceed with your question.
Thank you. Christophe, just again on price versus loss, in Q3, do you expect pricing to again exceed input costs in this quarter?
Yes, the price will be ahead of the input cost. And as mentioned before, so our objective is not just to get there, but it's to get back to the margins in percent that we used to have, and that takes a little bit more time. But so far, things are going really well.
You mentioned, again, Q3 being below your initial expectations with that catch-up in Q4. How much lower is Q3 going to be below versus your prior expectations on a sequential earnings basis?
This is hard to tell because it depends on agreements with customers, and it's a question of week one or two months. We do that very thoughtfully with our customers. So we're not a commodity-driven company. As you know, we are all driven by the value we create for our customers with whom we've had relationships for decades.
So we are very careful in how we do that really in order to make sure that a year from now, they still believe that we did it the right way that it was good for them, well, it was good for us as well. So it's all timing-dependent for Q3. That's why I'm directionally saying it's going to be a little bit pressured in Q3, and it's for Q3. That's why I'm directionally saying it's going to be a little bit pressured in Q3, and it's going to be better in Q4.
Your next question comes from the line of Ryan Connors with Boenning and Scattergood.
Thanks for taking my question. My first was just on -- you noted that the institutional results were actually not only up nicely year-over-year but actually outpaced the end market, at least as you saw there. Can you kind of give us some color around what metrics or quantitative metrics you have around making that assertion? And then talk about how sustainable that is going forward, is that just a snapback in some specific markets you're in? Or do you think you can continue to outperform as institutional recovers?
I like where we are in the U.S., especially since it's where the recovery happened first or second off the China, obviously, but the size is completely different. Maybe just to give you a few numbers as winning here, you look at the restaurant sales, so where 9% down so for us or 91% back to where they used to be which is a better way to look at it. 15% of the end units have closed as well out there in the market. And the dine-in traffic, which means so in the dining room, so it was down 37% as well in the second quarter.
So with us being 91% of where we were before, so it's much better than where the market is. And the second perspective is also, we measure how many restaurants or hotels for that matter -- so we serve and how many solutions they buy as well. And we are back to the levels that we were in 2019, knowing that the traffic is not as high as it used to be. So when traffic is coming back up as well, our growth is going to pick up further as well. So I see that as a sustained development.
Okay. And then on the flip side, there was a lot to like in the report, but Healthcare was a drag, which I mean, I guess we know that last year was the apex of the pandemic, but I'm a little bit surprised to see that. Can you give us some dynamics around that? Is that sort of more virtual medicine that's driving that? And what's the outlook for that Healthcare as we move into the recovery?
No, it's just a comparison versus exceptional results last year driven by the pandemic. So we're comparing some 12% or 13% growth in health care in of 2020 and 53% growth in Life Science as well, so in Q2 driven as well so -- by pharma demand and as well infection prevention solutions as well in the pharma sector. What's important for me is really to look at the underlying growth.
So when we strip out -- so the unusual demand of 2020 and one-timers, you see Healthcare, so in mid-single digit, which is better than where we used to be. So this 2%, 3% in the past has moved so closer to the 5%-ish. And Life Science as well underlying is in the double-digit territory, which is very good, so kind of sustained growth as well going forward. So when you strip out the noise, basically, you get to this mid-single and double-digit growth for Healthcare and Life Science, respectively.
Your next question comes from the line of Gary Bisbee with Bank of America Securities. Please proceed with your question.
First question on margins, I wanted to ask a little differently. Obviously, institutional still down from pre-pandemic levels quite a bit along with the revenue and the volumes. But the other three segments all had second quarter margins ahead of the second quarter of '19. And I know you've had ongoing cost reduction efforts, and there's a lot of moving parts, obviously, with the input costs in the short term and everything else. But outside of institutional, which presumably will continue to see the margin recover with revenue. For the other three businesses, is the margin this quarter a reasonable number to use to think about moving forward other than maybe a little bit of raw material hit in Q3 and maybe you get that back in Q4? Or are some of these that are still way above the 2019 margin? Is there risk of some further give-back to get to a more normal go-forward margin base for each of the segments? Thank you.
All three segments are a bit in different places but the headline is that the margin trends are a good indication overall of where we are and where we're heading. But if I just unpack them, just for you, you saw industrial first. Yes, it's growing. But as mentioned before, so it's impacted the most by the input cost, as is always the case, so nothing unusual in here. They have also the biggest share in pricing, and they're really good at it as well at the same time.
So there are different elements of cost and price are different, but ultimately so, industrial is going to keep its development in gross margin, and we expect the overall year to stay fairly close to where it used to be as well so last year. Healthcare and Life Science, it's -- as mentioned before, so we're comparing to very unusual growth numbers in Q2 as well last year. And if you strip that out, ultimately, so our margins have improved very nicely in 2020.
And we expect as well in Healthcare, Life Science to get quite close to where we were in terms of record margins in '21. And as you mentioned, so institutional is on its path to recover as such. So it's maybe so the business where the margin we had in Q2, the improvement in Q2, so it was a bit overstated as such because we compare in 2020 as well with two special events. The first one was the bad debt that we recorded for obvious reasons in Q2 during the beginning of the pandemic.
And second, we foregone as well so the lease payments for these machines. So you compare something that was lower. As such, it's going to change a little bit in Q3 and Q4. But overall, for the Company, good situation in margin and assuming that our assumption obviously is for roles and pricing happen as planned, which I do ultimately, so margins should keep evolving as expected.
Great. And then a quick follow-up. You mentioned in the prepared remarks that you put out there, refocus in mining away from coal and alumina. I think you've alluded to that in the past, but also I saw in downstream, some low-margin refinery exits. Are these materials? Or is this more just sort of coming out of the pandemic trying to refocus the portfolio on the best opportunities? Any color on the -- if there's any other strategic sort of…
Yes, Gary. It's mostly the latter. So it's really refocusing the portfolio towards the better opportunities. The mining ports moving away from coal, and we focusing towards fertilizers, for instance, which are related to ag into food is something that we started obviously, so way before the pandemic, and it's working really well. So, our exposure to cost has become minimal, over the past few years, and our exposure to the growth segments has become much better, as well. So, risks are lower and growth potential or higher, which is which is good.
On the downstream side, it's a bit different. Downstream, it's a bit of a tale of two stories in here. So you have petrochem kind of plastics, which is an end is an end market that's doing well. We've been growing for a long time. We are still growing right now, and we were growing during the pandemic. So this is an end market we like in an end market that we want to further focus on and we're bringing new solutions as well to recycle better plastic, for instance, which is very traditional with our sustainable solutions approach for this business.
And then the last point is refining, which is an industry that is in a complete transformation. As we all know, they have to reduce their footprint in terms of carbon footprint as well in here. And that's going to take a few years. So for us to get it right in the way that we have refineries produce with a lower carbon footprint and very good pilot project in there and help those companies as well refocus on renewable as well. So I like where we're going here that's going to take quite some time in order to get to a place where it sustained high-level growth as well in refining. So that's the way I would express it.
Your next question comes from the line of John McNulty with BMO Capital Markets. Please proceed with your question.
So I guess maybe two quick ones. Just with regard to Europe and how you see the reopening or gradual reopening impacting the businesses, can you give us a little bit of color or thoughts on how to think about things sequentially from 2Q to 3Q and the pace of that reopening for both the institutional and the industrial segment?
Yes. So, hi, John, the Europe reopening happens of early Q3. Let's put it that way, as you've read as well in the newspaper, I had a chance as well to spend a few weeks as well in Europe. So towards the end of June -- and Europe was clearly close until June, then suddenly, we opened everything. So we've really seen a pickup in our institutional business, so first and foremost, because kind of went from zero to kind of open. Obviously, that's quite a dramatic change, and we've seen that in our numbers, so very encouraging trends in institutional Europe.
And we see industrial, which was in a very different place. They were not closed, obviously, like restaurants and hotels, improving as well. So overall, Europe is doing okay so far. And international overall as well, it's an interesting perspective as well to keep in mind where last year, international was kind of flat, which means outside North America. So it was kind of flat for the whole company. And we see it coming back to growth, not only in Q2, but it's going to get even better in Q3, so good news on that front, too.
Got it. That's helpful color. And then I guess from a raw material perspective, can you speak to whether or not you had any issues in terms of sourcing raw materials and if that had any impact on the businesses? Or has it really just been a function of inflation and just getting that through in terms of pricing?
It's a great question. The market is tight out there. The Texas freeze made it harder, obviously, so in February for everyone out there. We're lucky enough to have a great procurement team, a great supply chain team as well that could find alternative sourcing, that could reformulate product. So overall, it's been heavy lifting within the organization. But we've been able to supply our customers in a fairly continued manner during the second quarter, and we see that improving as well in the quarters to come. So bottom line, a lot of work, but the great teams are helping customers being supplied as they should.
Your next question comes from the line of John Roberts with UBS. Please proceed with your question.
Labor is an issue for your institutional customers right now. Is your Lobster software or any of your other digital offerings and enabling you to help your customers with their labor issues?
It does. Actually, we're expecting to have close to 1 million users with Lobster Ink. by the end of the year, which is driven by exactly what you're saying. Those labor shortages in hotels and restaurants are creating some new challenges for that industry. They need to train a lot of people coming into restaurants and hotels, and that kind of solutions are definitely helpful. So that's the good side of the story.
And then could you talk about some of your other new product offerings? So many of the new products like fast-acting, hard surface cleaners had a surge last year, but are you still penetrating new customers? Maybe talk about it in terms of market penetration or customers that you're adding.
We are actually -- when you think about it, the fact that we have as many restaurants buying as many solutions as pre-pandemic today in a market which has seen units are declining by 15% during that time is a direct outcome of, first and foremost, Ecolab Science Certified, which is the circle the customer program since the customers had to buy all the solutions in order to be certified as such.
So that's been a great story that's progressing very well and you've maybe seen that McDonald's as well for instance, has endorsed as well that that program as well as a corporate companies have great story here, which is driven penetration of units and solutions are really good. And you're right. So when we think about sanitizing products, we've refocused quite a bit over the last 18 months partly driven by the pandemic as well.
All the surface sanitizers that we brought on the market are doing really well, by the way, and we still see a double-digit growth versus what we had pre-pandemic, which is a good sign, and we will keep innovating as well in that field. Like with disinfecting wipes, for instance, as well. So we've acquired two companies, one in the U.S., one in the U.K. in order to supply as well that market. So far so good on the innovation front and especially on the disinfecting side.
Next question comes from the line of Kevin McVeigh with Credit Suisse. Please proceed with your question.
I wonder -- just a point of clarification. The 4% price increasing, is that across all of Ecolab or just the industrial business? And if it's across all, is it 75% industrial or just no way to frame out that 4% increase overall that you talked to?
Yes. Kevin, so 4% is for the whole company, and you will have more in industrial because that's where we bear the brunt of the cost increases as well. So you're going to have higher than 4% in industrial. And in the other businesses, you're going to have lower than four ultimately.
Got it. And then just within kind of the downstream business overall, as you're clearly repositioning that, any thoughts as to what percentage of the revenues refining today and then where that ultimately bottoms, and ultimately, you're going into kind of higher growth areas as well? Just at 100%, is there ways to think about those end markets just within the downstream business itself?
It's hard to tell, but I would say that we've reached the bottom. In the refining part of downstream right now, so petrochem has been doing well all along. So that's a different story, obviously, as such. So I think it's going to improve progressively as of now in downstream refining. But it's going to take us a year or zero to get to the right place where we can say we truly like the trajectory of that business. It's an industry that is in total transformation as well.
The good news is that we are uniquely positioned to work with those companies to help them get the better place. I've had great discussions with some of the CEOs of those companies lately as well. They need us more than ever that's especially true with European companies, but also in the U.S. So longer term, I think it's going to be a very good opportunity for us.
Your next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.
Thank you and good afternoon. You mentioned in the prepared comments in specialty in the food retail business that you were seeing sales reversion as expected, some of it, I think, coming just from less consumer demand, but also there were labor issues from a customer perspective. And one of those things seems temporal and the other one seems sort of a little bit more structural. So could you help us understand how to think about those trends on a go-forward basis?
Yes. Hi, Vincent. So, it's really because we're comparing to a strong Q2 in specialty last year. It's a business that's doing well actually. So it's a comparison question underlying. So I like a lot -- so where quick serve and food retail are heading, very strong businesses, very profitable and serving successful industries right now as well. So it's the comparison that's kind of a little bit so skewing the numbers, otherwise, underlying very good, and I see a future that's going to keep on what you've seen pre-pandemic as well with those two businesses.
Okay. And then just as a follow-up. I assume you're on track for the $120 million of cost savings you've targeted for this year and I think the total number overall eventually was going to be 365. Are those still the right numbers?
Yes, let me give that question to Dan. I was looking forward to a question as well there. So that's a perfect opportunity.
Such a great question, so thank you. Yes, we remain very much on track to deliver our incremental $120 million year-on-year. And more broadly, maybe the A 2020 program, which has gone through a couple of iterations, we feel very good about the progress that we've made sequentially, and we'll continue to.
Your next question comes from the line of Scott Schneeberger with Oppenheimer. Please proceed with your question.
So my first, I want to inquire about new business wins. A lot of the description today has been recovering markets, but we -- in the press release, a lot of highlighted new business wins, and that's across water, paper, sign certified, you talked about and even pest. Could you just elaborate a little bit on maybe where you're getting the most strength and what type of wins you're getting? Thanks.
Great question. Thank you, Scott. So new business, interestingly enough, is gaining traction in every end market. We thought that in some markets like the institutional markets over the past 18 months, it would have been way harder. Actually, it's one of the areas where we've made the most progress which is really good news.
Industrial is doing really well in Healthcare as well as Life Science has always been great at it, which we see in the numbers as such, so a really good story. I would say one of the new emerging stories in your business is what many goals is this net zero, with many customers are trying to get closer to their sustainability ambitions, so water neutral, or water positive or carbon neutral, carbon positive.
And those discussions with those forward looking companies interestingly enough, our strengthening our relationships with them because they need our help even more than before, and that's growing as well as our new business opportunities because they need our help in all the units around the world and need much more solutions as well from us in order to get closer to the net zero ambition. So that's one of the new drivers that we're seeing emerging, which is good for our company.
Great. And then I think a good follow-up to that would be just to ask specifically on data centers and animal health, some of your other emerging growth opportunities, just a progress report there. And any quantification on pace of growth or margin expansion?
Yes. So starting with data centers. As mentioned earlier, we've been growing I think, 53% in the second quarter. It's been a terrific story. It used to be part of our light water industries business. In the past, we've created a dedicated unit 12 or 18 months ago, which is really a division that's focused on data centers and microelectronics, by the way, the Intel of that world as well.
And interestingly enough, its new expertise that we could build, its new offering that we could provide to those companies that are really interested in close to 100% uptime for all the reasons that we understand, our secure solutions as well from a digital technology perspective, they want to make sure that any access that we have with them is done in a totally secure way as well.
And those are companies that are very sustainability-friendly as well. So they all want to get -- so close to the net zero as fast as they can, all that is really driving that business in a great way. Animal health is a complete different story. Obviously, as such, this is something that takes time as well. We've created a dedicated unit. We've made acquisitions as well in that field, underlying. I like where we're going.
Q2 has been a bit subpar because we compare it to a very high Q2 in 2020, but that's a business that's going to be very interesting going forward for, at least one important reason that most of the farmers won't be or are not allowed to use antibiotics to protect the animals, and they need way more solutions in order to make sure that they are in a healthy environment in order not to get sick.
And this is exactly what animal health is doing in our business. So, it's an evolving proposition, but that's clearly aligned with the longer-term trends that customers and consumers like you and I ultimately are expecting -- so from the food manufacturers.
Your next question comes from the line of Rosemarie Morbelli with Gabelli & Company. Please proceed with your question.
I was wondering if you could talk a little bit about M&A. You have been making small acquisitions. Do you have an appetite for larger ones? And are there targets that you would be interested in?
So the short answer is, yes. We're interested in M&A and larger ones. We've done smaller ones over the past few months, as mentioned earlier, in the wipes area, which is a perfect complement to our offering in institutional, in healthcare and in industrial, and we couldn't produce that ourselves. We were manufacturing with other companies, and we've seen during the pandemic that, that could be a great business for us today and especially going forward. So we've done that as well.
We've done animal health as well last year, as I just mentioned as well as to the previous question. And we've been extremely active on the M&A front over the last six months. We have a very rich pipeline. We have very serious discussions with many as well out there. But at the end of the day, we have this very disciplined line on what we do and what we don't do. And when I look at all the discussions that we've had so far, we didn't find the exact opportunity so right now. But I feel confident that in the future, so we will get to a bigger opportunity at the right time.
Can you share with us any particular area where you are more likely to make a larger acquisition?
So I can't go too much in detail, Rosemarie, for obvious reasons, but the core areas of water is interesting, so for us; life science, which is a very successful business serving a very large and high growth as well end market; and third, related to digital technology as well. So those are kind of three areas that are very interesting for us.
All right. And then, if I may, what is the size of your animal health business currently?
I'm not sure we've disclosed that so far…
But you can do it now.
A few hundred million, let's put it that way, Rosmarie.
I'm sorry, did you say 200?
A few hundred.
Your next question comes from the line of P.J. Juvekar with Citi. Please proceed with your question.
Christophe, it's Eric Petrie on for P.J. You noted you were gaining share in U.S. restaurants. I was wondering if you had a similar data point on lodging. And then in both restaurants and lodging, how does that compare in Europe and Asia?
So my comment was mostly focused on restaurants because it was a highly impacted area. I like the progress we make in hotels a lot as well. And mostly because of the offering that we provide them in terms of our automation is of an application of our solutions. You've heard about the staff shortages that they all have. I've had the chance to talk to a few CEOs as well, so lately from large hotel chains in the U.S. and abroad. And this is top of mind [indiscernible].
So the solutions that we have which are not new, those are things that we've been doing. So for many, many years are ultimately helping them clean quicker, which is something they really saw challenged with right now or in the dish room as well as to clean dishes in an easier way, passed away with less labor as well, the same on water, the same on housekeeping and so on. And those are solutions that are ultimately helping us sell new business in lodging. So good progress in lodging as we've seen as well in foodservice.
And just a follow-up then to clarify, would you say you're gaining share in restaurants in Europe and Asia as well? Or is that not settled out?
We have less numbers over there, and to be honest, so those markets are reopening right now. So we've gained new business. We have to see how it looks in practice then afterwards. So I think that in the months and quarters to come, I will be in a better position to really share whether we've gained, which I believe we will, but I want to have the facts first or not.
Okay. And second from my follow-up question. How much were your sanitizer and hard surface cleaners sales down in the quarter? And what do you expect in terms of moderation for second half?
So sanitizing sales were -- so just to put in perspective, it's 10% of our overall sales for the Company. We had significant growth last year and we expect to be lower than last year overall. So, we don't disclose all the detailed numbers, but quite a bit higher than 2019. And that's probably the way you need to think about that, so lower than the peak of the pandemic, thank god, but higher than 2019 because practices have changed in most end markets and countries.
Your next question comes from the line of Laurence Alexander with Jefferies. Please proceed with your question.
Just a quick one to follow up on the discussion earlier of the shifts away from some of the lower margin businesses like refining. If you look at the moves you've done over the last couple of years, can you give a rough sense for how much sales you've moved away from sort of some of the out-of-favor business segments over the last couple of years? And how much stronger your sales line would have been if you hadn't done that, calling up the mix?
It's a great question, Laurence, but I have no idea because it's something that we're doing all along in every business. The focus is really to move up the chain, move up the margins. It can't be driven only by pricing. It needs to be because we are focusing on the higher-margin segments, higher-margin offering as well. So, its continuous work, where in some areas, it's more extreme, like the coal, as mentioned before, or refining in downstream that are more significant. But I couldn't put a number exactly on that because it's a continuous process.
Your next question comes from the line of Shlomo Rosenbaum with Stifel. Please proceed with your question.
Christophe, I want to ask you a little bit about how the Company is leveraging the technology investments as it approaches the C level of an organization in terms of their sustainability. So my understanding is this is enabling Ecolab to start discussions with the C-suite as opposed to starting discussions more at the plant level. And I'm wondering, how are those discussions progressing? Is there an increased pace? Are you seeing a large potential for you to accelerate or an incremental potential for you to accelerate Ecolab's revenue growth by being able to sell further up the chain within the organizations?
Thank you, Shlomo. This is a great topic. I'd love to have more time to zero in on that, but maybe so two quick answers, the what and the how. First, on the what, we have always more customers. It's not new, but it's clearly accelerating. So customers that are asking us to partner with us in order to find a path in order to get to net zero or positive water or carbon, Microsoft being one of the obvious ones. And it's not a secret since they've been expressing that on CNN over the past year or so.
So in order to get there, you need to have digital technology because you need to understand to make it easy to recycle water, which is a physical product. We need to understand in real time the quality of the water or like thereof actually, which indicates what kind of chemistry we need or what kind of technology is required in order to bring it back to the standard level that's being used in a data center or in a food plant as such. This is a direct application of our digital technology.
And second is the how. Since we are serving thousands of locations out there in the world, we are uniquely placed to know, what's world-class performance that can be achieved? Take a brewery, for instance, how much water per hectoliter of beer that's being produced. Well, we can compare within a company, a brewing company, how does the performance of the individual plants compared to the best-in-class.
We can compare across brewers as well. We can compare across industries as well as a company as well. So we can provide customers with good benchmark of what good looks like; and second, how to get there as well. That's all enabled by digital technology that we've been building, developing and implementing, so over the last 10, 20 years around the world.
Okay. And so is there, I guess, just to keep that going, so is there -- do you see a potential for that to really incrementally improve the revenue growth of the business because you're able to sell at these higher levels, so that obviously, you bring the capabilities that other companies can bring to the table?
Yes, absolutely. So what you saw with data centers, so the growth of 53% is directly driven by that. And where light as well, which has been growing 7% as well in the quarter is also driven by that kind of solutions. So early indications are positive and the more we can implement that across the end market the more it's going to help us as well as a company.
Okay, great. If you don't mind my sneaking in one more. Just the areas that are completely open now in terms of restaurants, let's say, taking the Florida or Texas, how does the chemical usage compare to what it was pre-COVID? What are the levels in the restaurants that more customers before and there are still customers?
It's still lower today, Shlomo, because in the dining rooms are, as mentioned before, so in Q2, it was 37% down so versus pre-pandemic as such, which means that the usage of cleaning and sanitizing solutions has been lower as well. But as dine-in is going up, so the demand is going up as well at the same time. So, the fact that we have the same number of units buying the same number of solutions today ultimately is a good sign as well as compound growth when dine-in is going to pick up as well in the weeks and months to come.
Ladies and gentlemen, there are no further questions at this time. And I would like to turn the floor back over to management for closing remarks.
Thanks, everyone. That wraps up our second quarter conference call. This call and the associated discussion and slides will be available for replay on our website. Thanks very much for your participation today, and have a great rest of the day.
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.