SGS profit up almost 50 per cent

SGS carries out inspections of all kinds around the world (SGS) SGS

Switzerland’s Société Générale de Surveillance (SGS), the world’s largest inspections group, has posted a 47 per cent rise in half-year profit.

The Geneva-based company has seen its profits increase for four consecutive semesters.

But it announced on Thursday it had cut its medium-term revenue target, blaming the strong Swiss franc for its lowered expectations.

SGS, whose activities include product testing and quality verification, reported a first-half net income of SFr100 million ($73 million), beating analysts’ estimates. Income increased over 41 per cent compared with the same period last year.

Group sales dropped to SFr1.174 billion, down 2.2 per cent in what it called a difficult trading environment.

SGS said that while operating margins had risen to 11.7 per cent from 8.1 per cent, it was looking to increase that figure to 16 per cent by 2005.

Increased revenue growth, over ten per cent, came mainly from the consumer testing, oil, gas and chemicals, and systems and services certification divisions.

Revenue target

SGS has trimmed its revenue goal from SFr3.2 billion to SFr3 billion, taking into account currency variations. Analysts say this is realistic given the outlook for a weaker dollar and is offset by better operating margins.

Around 50 per cent of SGS’ revenues are in dollars or dollar-linked.

In a press release, the inspections group said it expects to continue improving operating performance for the rest of year and should exceed last year’s net profit.

The company has undergone restructuring under CEO Sergio Marchionne, who took over in February last year.

Over 2,600 jobs were slashed from the payroll in a cost-cutting drive to avoid a repeat of the SFr75 million loss posted in 2001.

The formerly flagship trade assurance and government contract divisions were scaled back, but SGS says it is not going to sell them off after reviewing its business portfolio.

The company has also identified environmental services as a strategic business to be developed.

SGS shares have risen over 30 per cent at the Swiss stock exchange so far this year, after gaining 50 per cent in 2002.

The group specialises in inspection, verification and monitoring services for agriculture, minerals, petroleum and consumer products. It also provides certification services to governments and international institutions.

swissinfo with agencies

Key facts

SGS figures:
First-half revenue: SFr1.174 billion.
Operating margin: 11.7 per cent.
Net profit: SFr100 million.
Cash flow: SFr143 million.
Expected revenue for 2003: SFr3 billion.