July 8, 2019 / 4:58 PM / 5 months ago

Eurofins to slow pace of M&A, expand in emerging markets

PARIS (Reuters) - Laboratory-testing company Eurofins Scientific (EUFI.PA) plans to slow its frantic dealmaking pace in the next two years while also expanding in emerging markets to maintain double-digit sales growth over the next decade, its finance director said.

FILE PHOTO: Different meat samples in test tubes are seen in the food control laboratory of Eurofins in Ebersberg, east of Munich, February 18, 2013. REUTERS/Michaela Rehle/File Photo

The French-listed company, a world leader in food, pharma and environmental laboratory testing, almost doubled its revenues between 2015 and 2018 by buying dozens of companies. It now employs 45,000 staff in 47 countries.

Eurofins develops and sells tests for the pharmaceutical, food and environmental sectors to assess the safety, composition or purity of goods. It competes with companies including Evotec (EVTG.DE), Bureau Veritas (BVI.PA) and Intertek (ITRK.L) in a fragmented, multibillion dollar market.

Eurofins’ shares are up 20% year-to-date.

Hugues Vaussy told Reuters that rising demand for testing globally would underpin growth, supported by greater consumer and environmental awareness, while education and purchasing power levels were rising in emerging economies.

“As of today, we make around 85% of our business in Europe and North America. Looking forward, having a balanced geographic mix between these two regions and the rest of the world would make much more sense,” Vaussy said.

Founded by a doctor, Gilles Martin, who purchased the rights of a food and beverages-testing technology developed by the University of Nantes, the company has grown from a single laboratory in 1987 to more than 800 last year.

Much of its 2018 sales growth came from some 50 bolt-on acquisitions. Revenues last year came in at 3.78 billion euros ($4.24 billion), up 27.2%, while net profit rose 3.3% to 224 million euros.

Eurofins Scientific is aiming for sales of 5 billion euros in 2020 and Vaussy said the group believed it was possible to maintain an annual sales growth at 10% over the next 10 years.

“Demand is on the rise with consumer awareness increasing everywhere, better education and stronger purchasing power in many countries,” Vaussy said.

But he said investors should expect a slower merger and acquisitions pace over the next two years as the group integrates recently purchased assets.

Vaussy said the ransomware computer virus, which caused disruption to its IT systems in several countries, was likely to have affected sales in the second quarter. But he said it was too soon to project the extent of the impact of the cyber attack.

“We are undertaking a laboratory by laboratory assessment of the damages,” he said, adding that IT forensics experts had not found evidence of theft or transfer of confidential client data.

Vaussy declined to comment on whether the company knew who launched the attack. The group is expected to provide more details on August 29 when it announces its second-quarter results.

Reporting by Matthias Blamont; Editing by Richard Lough, Georgina Prodhan and Jane Merriman

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