(Adds quotes, details from news conference)
By Tom Miles
GENEVA, July 17 The world's largest testing and
inspection company, SGS, is hunting for an acquisition
in the marine sector to add to a portfolio of businesses slowed
by weak demand for minerals services and a strong Swiss franc.
First-half net profit at SGS rose 6.3 percent to 255 million
Swiss francs ($284 million), short of a forecast of 283 million
francs in a Reuters poll of analysts.
"All of the businesses grew. Not all of them grew as much as
we would like them to have done," Chief Executive Chris Kirk
told a news conference. Sales would grow by around 6 percent in
2014, he said, at the bottom of a previous forecast range of 6-9
SGS shares were down 2.6 percent at 2,079 francs by 1318
The Swiss company, whose activities range from food and toy
safety tests to anti-corruption certification and vehicle
inspections, wants to move into marine services, which Kirk said
was a $300-$400 million business for most of its competitors.
Because of the technology involved, SGS would not be able to
start a marine business from scratch, unlike its home-grown oil
and gas unit, he said.
"In the marine business, I think I'm going to have to buy
something. I don't know what. We look on an absolutely daily
basis," Kirk said, adding that he had already looked at two or
three potential targets.
Last year, SGS said it would not be able to meet ambitious
growth targets set in 2010, including almost doubling sales by
2014. But it is pursuing acquisitions, snapping up small, highly
specialised rivals almost every month.
It plans more in 2014, adding more in terms of sales than
the businesses it has bought so far this year.
In the first half of 2014, SGS's sales were up 5.3 percent
at 2.8 billion Swiss francs, driven by its oil, gas and
chemicals segment. But sales for the minerals unit slumped 6
percent as mining firms cut operating and capital expenditure.
The cyclical downturn in mining has also hit SGS's peers,
such as Britain's Intertek and France's Bureau Veritas
SGS has cut 2,000 jobs in its minerals business in the past
18 months, including 400 jobs in the first half of 2014, which
Kirk said should enable margins to improve later this year.
The firm was also expanding market share with new testing
laboratories at existing mine sites, which were not reliant on
new exploration expenditure, he said.
SGS is investing 50 million francs to expand into
opportunities from the U.S. shale oil boom, and has about
100-150 people working in the Bakken field and in West Texas.
"We're putting a lot more in there," Kirk said.
But the switch from coal to gas was eroding SGS's U.S. coal
business and causing a worldwide slowdown in coal exploration.
Another potential boon could be a global agreement on "trade
facilitation" at the World Trade Organization, which would
involve slashing red-tape at customs and expanding international
standards for traded goods.
"We're waiting with baited breath," Kirk said, adding that
he hoped the impact of a deal would come within 18 months.
($1 = 0.8980 Swiss Francs)
(Additional reporting by Alice Baghdjian; editing by Tom