SGS Q1 2025 presentation slides: record sales driven by 5.6% organic growth

Introduction & Market Context

SGS SA (SIX:SGSN) presented its Q1 2025 sales update on April 24, 2025, reporting record quarterly sales despite challenging global economic conditions. The Geneva-based testing, inspection, and certification leader highlighted strong organic growth across all business segments, with particularly impressive performance in emerging markets and the Health & Nutrition division.

The presentation, delivered by CEO Géraldine Picaud and CFO Marta Vlatchkova, emphasized the company’s strategic focus on sustainability services and digital trust solutions as key growth drivers, while maintaining its full-year outlook despite potential headwinds from tariffs and currency fluctuations.

Quarterly Performance Highlights

SGS reported record Q1 2025 sales of CHF 1,681 million, representing a 6.6% increase compared to the same period last year. Organic growth contributed 5.6% to this performance, while acquisitions added 1.3%, partially offset by a 0.3% negative impact from foreign exchange.

As shown in the following sales bridge chart, the company’s growth was primarily driven by strong organic performance:

The company also highlighted its successful scrip dividend program, which achieved a 63.3% take-up rate. This initiative will redirect nearly CHF 400 million in cash toward accelerating the execution of the company’s Strategy 27 plan.

Business Segment Analysis

SGS reported solid organic growth across all business lines, with particularly strong performance in Health & Nutrition. The following chart breaks down the organic sales growth by business segment:

Health & Nutrition emerged as the standout performer with 10.4% organic growth, reaching CHF 218 million in Q1 2025. This exceptional performance was driven by double-digit organic growth in Food, strong growth in Nutraceutical and Dietary supplement certification, high single-digit growth in Pharma, and excellent performance in Cosmetics & Personal Care.

The company’s largest segment, Industries & Environment, which represents 32% of Group sales, delivered 5.1% organic growth to reach CHF 546 million. This growth was led by:

• Double-digit organic growth in PFAS testing within the Environment subsector
• High single-digit organic growth in Safety services
• Moderate growth in Projects & Advisory
• High single-digit organic growth in Industrial Testing

Connectivity & Products, representing 20% of Group sales, achieved 6.9% organic growth, reaching CHF 332 million. The segment benefited from acceleration in Connectivity services and high single-digit organic growth in both Softlines and Hardlines.

Strategic Initiatives in Sustainability and Digital Trust

SGS highlighted its strategic focus on sustainability services and digital trust solutions, which are delivering accelerating growth for the company. In the sustainability arena, SGS secured several significant contracts, including:

• A multinational airline group contract for GHG emissions verification, including Scope 3
• Implementation of PFAS-free textile regulations through its bluesign® certification
• A major EU contract for extensive analyses on soil quality, biodiversity, and eDNA

The company’s digital trust initiatives have also gained significant momentum, as illustrated by several pioneering achievements:

These digital trust innovations include delivering the world’s first ISO/IEC 42001 AI certificate for customer airport services at Singapore’s Changi airport, achieving top accreditation in high assurance EU Cybersecurity Certification for all European laboratories of Brightsight, and conducting the first post-quantum cryptography security evaluation against Common Criteria for Samsung (KS:005930).

M&A Activity and Growth Strategy

SGS continues to execute its growth strategy through targeted acquisitions, completing eight bolt-on acquisitions year-to-date with a combined annual sales contribution of CHF 60 million. The company indicated it maintains a strong pipeline of potential acquisition targets aligned with its strategic priorities.

The following map illustrates the global distribution of recent acquisitions:

These acquisitions are expected to contribute 1% to 2% to annual sales growth, complementing the company’s organic growth initiatives.

Regional Performance

SGS reported growth across all geographic regions, with particularly strong performance in emerging markets. The following chart details the sales growth by region:

Latin America led regional growth with an impressive 15.7% increase, followed by Eastern Europe, Middle East & Africa at 10.4%. Asia Pacific, which represents a significant portion of the company’s business, grew by 6.1%. North America and Europe showed more moderate growth at 3.9% and 1.9%, respectively.

2025 Outlook

Despite potential challenges from tariffs and foreign exchange fluctuations, SGS confirmed its outlook for 2025, projecting:

• 5% to 7% organic sales growth
• 1% to 2% bolt-on contribution to annual sales growth
• At least 30 basis points improvement in adjusted operating income margin in reported terms
• Strong free cash flow generation

The company’s confidence in maintaining its guidance suggests management believes its strategic focus on high-growth areas like sustainability and digital trust, combined with its geographic diversification, will enable it to navigate potential macroeconomic headwinds successfully.

SGS shares closed at CHF 2,600 prior to the presentation, down 0.5% or CHF 13 for the session. The stock has traded between CHF 2,447 and CHF 2,479 over the past 52 weeks.

Full presentation:

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