Trump raises tariff demands in EU trade talks to 15-20% - FT
GuruFocus -
- Revenue: EUR3.4 billion, up 6.6% at constant currency and 1.9% at actual rates.
- Operating Profit: EUR590 million, up 13% at constant rates.
- Operating Margin: 17.4%, up 100 basis points at constant currency.
- Earnings Per Share (EPS): 240.6p, growth of 15.2% at constant rates.
- Return on Invested Capital (ROIC): 22.4%, up 250 basis points.
- Adjusted Cash Flow: EUR789 million, a record high.
- Free Cash Flow: EUR409 million, up 8% year on year.
- Net Debt: EUR500 million, reduced by EUR111 million from 2023.
- Net Debt-to-EBITDA Ratio: 0.7 times.
- Dividend: 156.5p, up 40.1% year on year.
- Consumer Product Revenue: EUR959 million, up 7.6% year on year.
- Corporate Assurance Revenue: EUR496 million, up 8.6% year on year.
- Health and Safety Revenue: EUR337 million, up 9% year on year.
- Industry and Infrastructure Revenue: EUR844 million, up 2.4% year on year.
- World of Energy Revenue: EUR75 million, up 8% year on year.
- Share Buyback Program: Announced initial EUR350 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Intertek Group (LON:ITRK) PLC (IKTSF) delivered a strong financial performance in 2024, with earnings slightly ahead of market expectations.
- The company achieved a fourth consecutive year of mid-single-digit like-for-like revenue growth, with a 6.3% increase at constant currency.
- Operating profit increased by 13% at constant currency, and the operating margin improved by 100 basis points to 17.4%.
- Intertek Group PLC (IKTSF) reported a record adjusted cash flow of EUR789 million, with a cash conversion rate of 121%.
- The company announced a EUR350 million share buyback program and raised its medium-term margin targets to 18.5%-plus.
- Sterling’s strength compared to major currencies negatively impacted revenue growth by 470 basis points.
- The Industry and Infrastructure division experienced a low-single-digit like-for-like revenue growth, partly due to the exit of non-profitable contracts.
- Operating profit in the Industry and Infrastructure division decreased by 2%, with a margin decline of 40 basis points.
- The company faces challenges from cost inflation, which partially offset positive margin drivers.
- There is ongoing uncertainty regarding global trade dynamics, including tariffs and geopolitical tensions, which could impact future performance.
A: Andre Lacroix, CEO: The growth was driven by a strong rebound in Global Trade Services (GTS), double-digit growth in softlines, and high single-digit growth in hardlines. This was partly due to a low base in 2023 when retailers reduced activities. We are gaining market share, but it’s difficult to measure precisely. We don’t see any signs of client activity slowing due to tariff uncertainties.
Q: How do you view the current M&A landscape, and are there opportunities for larger strategic acquisitions?
A: Andre Lacroix, CEO: We maintain a strategic and selective approach to M&A, focusing on high-growth, high-margin sectors. The landscape has been quiet post-COVID, but we see it becoming more open. We prefer bolt-on acquisitions that augment our ATIC value proposition without diluting margins.
Q: Can you elaborate on the margin outlook and the factors contributing to the expected increase?
A: Andre Lacroix, CEO: Margin accretive revenue growth is driven by operating leverage, productivity improvements, and strategic investments in high-margin sectors. We focus on volume, price, and mix at the local level to drive margin improvements. We expect to achieve our medium-term target of 18.5%-plus.
Q: What are the drivers behind the high single-digit growth guidance for Corporate Assurance, considering recent regulatory changes?
A: Andre Lacroix, CEO: The focus is on helping clients benchmark their sustainability strategies and address operational risks. The recent EU regulatory changes were expected and do not impact our expectations. We continue to offer operational sustainable solutions tailored to specific industries.
Q: How do you plan to manage the impact of tariffs and global trade changes on your business?
A: Andre Lacroix, CEO: We focus on the number of SKUs tested and factories audited, which are not significantly impacted by tariffs. Our capital-light and decentralized business model allows us to adapt quickly to changes in global trade dynamics. We see China+1 as an opportunity to expand our ATIC market.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.