Goods inspection firm SGS SA (SGSN.VX) Thursday pledged better second-half earnings after first-half net profit rose a weaker-than-expected 5.9%, and said it would continue looking at acquisitions of up to 300 million Swiss francs ($285.7 million).

SGS Chief Executive Chris Kirk said the second half will improve over the first, and that the initial weeks of the third quarter have continued in a similar fashion to the second quarter, which was "very, very good for us."

Kirk said SGS will firm up its outlook--which currently calls for higher net profit and revenue than the CHF566 million and CHF4.71 billion, respectively, posted in 2009--in September. Then, the company plans to disclose revenue and operating profit targets for 2014 to investors.

The Geneva-based company's net profit rose to 270 million Swiss francs ($257.1 million), from CHF255 million, missing views, which averaged CHF275 million in a Dow Jones Newswires analyst poll.

SGS was hit hard by the economic downturn, and revenue slid last year as the slowdown in global trade reduced demand for its testing and inspection services, leading the company to cut costs. However, there are signs that trade is picking up again as economies emerge from recession.

Revenue in the first half rose 0.9% to CHF2.35 billion, from CHF2.33 billion a year earlier, as the company's consumer testing, systems and services, minerals, and government institution services units each posted organic growth of more than 5%. However, revenues were hit as its automotive unit lost a major vehicle testing contract in Ireland and sales fell at its agricultural, environmental, and industrial services units due to lower agricultural commodity flows, prolonged severe weather and Spain's economic woes.

CEO Kirk said the company was still looking at making acquisitions of up to CHF300 million after four recent ones, including Intron Group in the Netherlands, added CHF30 million to revenues in the first half of the year.

Kirk added that SGS isn't interested in a large-scale merger with one of its major rivals, Intertek Group PLC (ITRK.LN) of the U.K. or France's Bureau Veritas SA (BVI.FR), which last month spent GBP 450 million to buy Inspicio unit Inspectorate.

"In terms of transformational (deals), there are issues we would face such as probably concentration in the market, and that we may become too big for our customers to accept, so we may get them voting with their feet. The very large ones, the big transformation deals, we're not focused on them at the moment," Kirk said.

At 1204 GMT, SGS was down CHF39, or 2.5%, at CHF1,546, underperforming a slightly higher Swiss blue-chip market.

Analysts said the first-half results had missed expectations, although Patrick Hasenboehler, a Zurich-based analyst for private bank Sarasin & Cie who rates the stock neutral, said "first-half figures are solid and the news that growth was achieved primarily in the second quarter on the back of gradually improving economic conditions feeds the confidence for the full year results."

-By Katharina Bart, Dow Jones Newswires; +41 43 443 8043; katharina.bart@dowjones.com
SGS (PK) (USOTC:SGSOY)
Historical Stock Chart
From Jun 2024 to Jul 2024 Click Here for more SGS (PK) Charts.
SGS (PK) (USOTC:SGSOY)
Historical Stock Chart
From Jul 2023 to Jul 2024 Click Here for more SGS (PK) Charts.