Sodexo First-Quarter Revenue Advances on Latin America, Asia

Sodexo (SW), the world’s second-biggest provider of catering services, said fiscal first-quarter sales gained, led by advances in Latin America and Asia, and reiterated its outlook for growth this year.

Organic revenue grew 2.1 percent in the quarter through November, the company said today in a statement. The measure excludes acquisitions and disposals, as well as currency fluctuations. Total revenue rose 7.4 percent to 4.95 billion euros ($6.5 billion).

Sodexo maintained its forecast for “modest” growth in like-for-like sales and operating profit this year. It plans cost cuts that will have a positive effect of 130 million euros to 150 million euros a year from fiscal 2015, the Issy-les- Moulineaux, France-based company said in November. Organic revenue grew 6.5 percent in the last fiscal year, when Sodexo benefited from contracts for the London Olympic Games and the New Zealand Rugby World Cup.

Organic revenue grew 3.3 percent in the first quarter, excluding the effect of the Rugby World Cup a year earlier, Sodexo said.

First-quarter performance was “very much in line with the trends we saw in the second half” of the fiscal 2012 year, Chief Executive Officer Michel Landel said today on a conference call. Organic growth is “likely to be modest given the current economic environment, particularly in Europe,” he commented in the statement.

Scaling Down

The stock rose 0.8 percent, or 49 cents, to 64.35 euros at 9:27 a.m. in Paris. That gives the company a market value of 10.1 billion euros.

Organic revenue increased 2 percent in continental Europe, the company’s second-biggest region, it said, even though Sodexo sees signs of “scaling down” by corporate clients across the continent.

Revenue growth slowed to 0.6 percent in North America after the company lost a contract with Ascension Health last year. The company has won “some significant new contracts, particularly in the U.S.,” which will help to increase its health-care unit’s growth, it said. North America represented about 39 percent of sales last year. Growth in the Rest of the World, which includes Latin America, Africa, the Middle East and Asia, was 8.6 percent “despite some signs of slower economic activity in several countries,” the caterer said.

“The slow-down of the organic growth rate compared to the first quarter last year was expected given the omission of a positive one-off, a challenging base effect in the emerging markets and the current lackluster business environment in Europe,” Patrick Hasenboehler, a Zurich-based analyst at Sarasin, wrote in a note.

Landel said today he was “still confident” Sodexo can increase its revenue by 7 percent a year in the medium term.

To contact the reporter on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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