November 7, 2018 / 7:55 AM / 14 days ago

UPDATE 1-Swiss SGS 2020 profit targets hit by commodity downturn

(Adds details about revenue sources, management changes, investor event)

By John Miller

ZURICH, Nov 7 (Reuters) - Swiss testing and inspection company SGS cut its profit targets for 2020 on Wednesday, saying a downturn in commodities markets had also prompted it to make management changes.

Geneva-based SGS gets about 45 percent of its 6.3 billion Swiss francs ($6.30 billion) in annual revenue from services to the agriculture, minerals and oil, gas and chemicals industries.

SGS declined to give specifics on where its business has been impacted most, saying that information would be released at an event for investors in Bordeaux, France, on Thursday.

“We’ve made solid progress in repositioning some divisions to respond to the recent commodity downturn, strengthened our core business and made some management changes,” Chief Executive Frankie Ng said. He did not say which managers were affected.

SGS said its goal of hitting at least an 18 percent adjusted operating income margin in 2020 would be delayed. It is now targeting a margin of above 17 percent, based on mid-single digit organic growth.

Ng reiterated SGS’s full-year 2018 forecast of solid organic growth, a higher adjusted operating income margin and robust cash flow. It said it will be seeking to accelerate mergers and acquisitions as it continues to consolidate the fragmented testing services market.

It bought 12 companies last year, but most of its acquisitions are relatively small, like its purchase of Inter-Basic Resources, Inc., last month with 25 employees and $3.5 million in revenue. ($1 = 1.0004 Swiss francs) (Reporting by John Miller; Editing by Gopakumar Warrier and Alexander Smith)

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