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Sodexo Targets Earnings Growth on Emerging-Market Expansion

Nov. 9 (Bloomberg) -- Sodexo, the French caterer whose clients include the U.S. Marine Corps, targets earnings and sales growth in fiscal 2012 as it expands in emerging markets.

Sodexo aims to increase operating profit, excluding exchange rate effects and other items, by about 10 percent in fiscal 2012 and organic growth by 5 percent to 8 percent, the Issy-les-Moulineaux, France-based company said in a statement today.

Sodexo acquired Puras do Brasil this year to expand in South America, which is growing faster than its home market. Sales at Sodexo’s main business rose almost 16 percent in regions outside of Europe and North America in the year ended in August on a so-called organic basis. Sodexo and larger competitor Compass Group Plc have benefited as businesses and governments outsource catering and cleaning.

The French company aims to cut operating costs and limit the effect of food inflation as governments’ debt and rising unemployment “exert significant pressure on economic activity in both the public and private sectors,” Chief Executive Officer Michel Landel said in the statement.

Sodexo shares fell 2 percent to 52.25 euros as of 9:45 a.m. in Paris trading. The stock has gained 1.3 percent this year, compared with a 2.7 percent decline for Compass in London.

Sodexo predicted a contribution to consolidated revenue of about 4 percentage points from its recent acquisitions, including Puras do Brasil and upmarket catering company Lenotre. In the medium term it aims for annual average revenue growth of 7 percent and it targets an operating margin of 6.3 percent in four years.

Operating Profit

Companies that provide food service and service vouchers are a “relative safe haven” for investors during a slowdown, Tim Ramskill, a Credit Suisse analyst, said in a Nov. 7 note.

Sodexo has renewed its partnership with the U.S. Marine Corps, with two contracts covering 51 military bases in the U.S., it said in the statement It also won contracts for the Prado Museum in Madrid, Nokia Beijing and Volkswagen India.

Operating profit for the 12 months through August rose 11 percent to 853 million euros ($1.18 billion). That missed the 865 million-euro average estimate of eight analysts in a Bloomberg survey. Sodexo’s total revenue climbed 5.4 percent to 16 billion euros.

For the company’s main on-site service solutions business, organic growth, which excludes acquisitions and exchange rate movements, rose almost 16 percent in the rest-of-the-world region including Latin America and Asia, 2.9 percent in continental Europe and 4.3 percent in North America.

Sodexo proposed a 8.1 percent increase in its full-year dividend to 1.46 euros per share.

To contact the reporter on this story: Armorel Kenna in Milan at akenna@bloomberg.net

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

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