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SGS shares surge on aggressive growth targets

CEO Sergio Marchionne has said SGS has a "great future"


Shares in the world's largest inspection group, the Société Générale de Surveillance, jumped by almost ten per cent on Friday.

The share price in late afternoon trading at the bourse was SFr493 ($307.74), up from the previous day's close of SFr448, as investors moved in on what they consider to be a money spinner.

The Geneva-based SGS on Thursday was upbeat about its future prospects under the leadership of the new CEO, Sergio Marchionne.

The former boss of Swiss chemicals company, Lonza, told shareholders that the company could increase sales to SFr3.2 billion in three years without making major acquisitions.

New lean structure

He told them this could be achieved with a new lean organisational structure and by improving productivity.

Marchionne also forecast operating margins of above 12 per cent within three years and earnings per share of SFr38.

"The current business portfolio is capable of generating a three-fold increase in operating income in three years by concentrating on productivity," he told the annual meeting.

However, he said the productivity drive required "an immediate and substantial overhaul" of the leadership team and structure.

"SGS can and should be re-made beginning now," he added.

Uphill battle

The company has been facing an uphill battle since 1998 to improve profitability amid shareholder and boardroom squabbles and the decrease of its lucrative government contracts business.

SGS made a loss of SFr75 million last year due to an exceptional charge of SFr177 million taken at its Global Trade Solutions unit, which offers services to governments, trade and international institutions.

Marchionne said on Thursday that GTS had been embroiled in a series of activities before 1998 which appeared to have violated basic principles of integrity and ethical conduct.

He said that GTS in a slimmed down form would continue to develop new products. However, he added that the business would "never be what it once was".

Considered an ambitious and uncompromising manager, Marchionne said it was imperative that SGS focused on bringing its own house in order before contemplating major acquisitions.

"SGS has a great future, but it is one that must be worked at, and worked at hard," he told shareholders.

swissinfo with agencies

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