October 23, 2018 / 7:34 AM / a year ago

Eurofins Scientific raises outlook after acquisitions, third-quarter growth

(Reuters) - Luxembourg-based food and biopharma product testing firm Eurofins Scientific (EUFI.PA) raised its earnings expectations for 2019 and 2020 for the second time this year on Tuesday following acquisitions and a strong third quarter.

The company has been expanding rapidly, with 60 acquisitions, including EAG Laboratories in North America, and 30 laboratory start-ups last year.

Three acquisitions - that of EAG, as well as Covance Food Solutions bought this year from LabCorp (LH.N) for $670 million (517 million pounds), and TestAmerica to be acquired from JSTI Group 300284.SZ - constitute the biggest M&A spree in the company’s history, it said.

It said it now sees revenues of 4.6 billion euros (4.1 billion pounds) and 5 billion euros in 2019 and 2020 respectively, provided all acquisitions close as planned in 2018, with 1 billion euros in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) in 2020.

“Our sustained organic growth this year, shown again in Q3 (...) enabled us to once again raise our objectives for 2020,” Chief Executive Gilles Martin said in a statement.

Third-quarter revenues rose 30.6 percent to 955 million euros, mainly thanks to revenues from new businesses.

Revenue from existing businesses, however, only rose by just over 5 percent in July-September and shares in the company were virtually flat at 0722 GMT.

“The revenue objectives are surely still conservative in view of the group’s acquisition rhythm, as is often the case, whereas the profitability ambitions were not revised upwards,” said Midcap Partners analysts in a note to clients.

The share price no longer represents a premium to its peers, they said.

Eurofins said acquisitions signed or closed this year contributed approximately 700 million euros to total revenues of 2.7 billion euros in January-September of this year.

The acquisitions of Covance Food Solutions and TestAmerica will enable it to rebalance its activity between its two main markets, the United States, which accounted for 32 percent of sales during the first nine months of 2018, and Europe, it said.

That would allow it to slow down M&A activity over the next few years to refocus on completing its efficiency programme and offer better and differentiated testing services to its clients.

Reporting by Piotr Lipinski in Gdynia; editing by Darren Schuettler and Susan Fenton

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