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Sodexo Confirms 2011 Targets as Third-Quarter Sales Rise

Sodexo Confirms 2011 Targets as Third-Quarter Sales Rise
Paola Gonzalez, Sodexo chef, prepares a sandwich at a Sodexo cafeteria in Paris, France. Photographer: Antoine Antoniol/Bloomberg

Sodexo SA, the world’s second-largest caterer, reiterated a forecast for higher earnings this year after third-quarter revenue rose 2.6 percent.

Sales in the three months ended May 31 rose to 4.14 billion euros ($6 billion) from 4.04 billion euros in the year-earlier period, the Issy-les-Moulineaux, France-based company said in a statement today. Sodexo was expected to report sales of 4.17 billion euros, according to the average of two analyst estimates.

Sodexo and larger rival Compass Group Plc are benefiting as companies and governments move to outsource more catering and cleaning services. The French company, which provides food to the U.S. Marine Corps, started a new services contract for 136 public schools in Detroit during the quarter, one of its biggest-ever U.S. education orders, according to the statement.

Revenue from the on-site services solutions unit rose 2.3 percent in the quarter to 3.96 billion euros. The division’s sales in Europe excluding Ireland and the U.K. rose 4.4 percent. Sales in the voucher-service business increased 7 percent.

Sodexo forecast full-year revenue growth of about 4.5 percent and a 10 percent rise in full-year operating profit, excluding currency effects, maintaining previous objectives.

Targets Unchanged

The company is keeping targets unchanged as the economy remains uncertain, Chief Executive Officer Michel Landel said on a conference call. “Beyond fiscal 2011, we remain confident in our ability to continue to accelerate revenue growth over the medium term,” he said.

“The fact that operating profit guidance remains unchanged suggests that, as at the interims, the company continues to be cautious over food inflation concerns” in the third and fourth quarters, said analysts at Espirito Santo, who recommend investors buy Sodexo shares. “We remain confident in the company’s ability to mitigate inflation.”

Sodexo shares fell as much as 1 percent and were down 13 cents, or 0.2 percent, at 53.83 euros as of 10:20 a.m. in Paris trading. The stock has risen 4.4 percent this year, compared with a 4 percent increase for Chertsey, England-based Compass. Edenred, Sodexo’s larger rival in the voucher-service business, has gained 19 percent.

“We like Sodexo but we continue to prefer Compass,” Evolution Securities analyst Nigel Parson wrote today. He cut his recommendation on the shares to “neutral” from ”add.”

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