July 17 (Bloomberg) -- SGS SA, the world’s largest product inspector, posted a smaller increase in first-half profit than analysts expected because of restructuring costs in Europe and a decline in earnings at its minerals business.
Net income rose 10 percent to 265 million Swiss francs ($281 million), the Geneva-based company said in a statement today. That missed the average 296 million-franc estimate of seven analysts surveyed by Bloomberg.
SGS is a gauge of the broader economy as it sells verification and testing services for industries from agriculture to finance and mining. While the company reiterated its forecast for “solid” top- and bottom-line growth in 2013, the 5 percent increase in organic revenue was only half the gain posted over the past two years, according to Patrick Hasenboehler, an analyst at J. Safra Sarasin in Zurich.
“The results were impacted by a global cyclical downturn in the mining sector and the very limited economic recovery in Europe,” Hasenboehler, who kept his neutral recommendation on SGS, said in a note to clients. “There will be further restructuring of its European businesses due to the weak economic environment.”
SGS declined as much as 3.8 percent in Zurich trading and was down 3.5 percent to 2,061 francs as of 9:54 a.m., cutting the company’s market value to 16.1 billion francs.
“Economies in the Eurozone continued to weaken during the semester necessitating further restructuring of our operations there,” said SGS, adding that it incurred one-time costs of 12 million francs. “We also experienced some slowdown in parts of our minerals business due to the global slowdown in demand.”
Sales increased 7.2 percent to 2.9 billion francs excluding currency fluctuations, SGS said. The company announced four acquisitions this year in China, South Africa and the U.S. as it seeks to reach an annual sales target of 8 billion francs by the end of 2014.
Groupe Bruxelles Lambert SA became an SGS shareholder last month after paying 2 billion euros ($2.6 billion) for a 15 percent stake owned by Exor SpA, the Agnelli family holding company which controls Fiat SpA. Billionaire August Von Finck and members of his family own 14.97 percent of the company, which started in 1878 as a grain inspection house.
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