• Revenue: EUR3 billion with an organic growth of 9.2% and 9.3% at constant currency.
• Adjusted Operating Profit: EUR451.9 million, up 4.1% year-on-year, with a margin of 15%.
• Adjusted Net EPS: EUR0.64, up 4.5% and 16% at constant currency.
• Free Cash Flow: EUR189.9 million, up 44% year-on-year.
• Net Debt to EBITDA Ratio: 1.06 times at the end of June 2024.
• Organic Growth by Segment: Marine and Offshore 14.7%, Industry 17.5%, Certification 16%, Consumer Products 7.3%.
• Adjusted Effective Tax Rate: Reduced by 1.7 percentage points compared to H1 2023.
• CapEx: Decreased to 2% of revenue, expected to be 2.5% to 3% for the full year 2024.
• Share Buyback Program: EUR200 million completed.
• Bond Issuance: EUR500 million bond issued, due January 2025.

• Warning! GuruFocus has detected 4 Warning Signs with XFABF.

Release Date: July 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Bureau Veritas SA (BVRDF) reported a strong financial performance in the first half of 2024, with revenue reaching EUR3 billion and an organic growth of 9.2%.
• The company achieved a double-digit organic growth of 10.4% in the second quarter, driven by high volumes and pricing.
• Adjusted operating profit increased by 4.1% year-on-year to EUR451.9 million, with a margin of 15%, up 33 basis points at constant currency.
• Free cash flow totaled EUR189.9 million, up 44% year-on-year, reflecting disciplined capital allocation and rigorous working capital management.
• Bureau Veritas SA (BVRDF) upgraded its full-year revenue growth outlook to high single digits, reflecting strong performance and confidence in business execution.

Negative Points

• The company's reported growth was only 4% due to a 5.3% negative impact from foreign exchange, mainly attributed to the strength of the euro against several emerging market currencies.
• Agri-food and commodities division experienced a margin decline of 90 basis points organically, reflecting a negative mix from the metals and minerals segment.
• Building and Infrastructure (B&I) margin eroded by 53 basis points organically, with strong recovery in US operations not fully compensating for soft performance in China.
• The consumer technology segment contracted in the first half, affected by low demand for electronics, wireless products, and electrical vehicle equipment.
• Despite strong organic growth, the company's adjusted operating margin guidance remains unchanged due to necessary investments in performance programs.

Q & A Highlights

Q: Why has there been no change to the margin guidance despite higher organic growth and operational leverage? Can you quantify the expected margin improvement? A: Hinda Gharbi, CEO: We maintained our margin guidance as we need to invest in performance programs to enable improvements. We are committed to margin improvement at constant currency. Francois Chabas, CFO: We aim for continuous margin improvement, around 10-25 basis points, consistent with our capital market day guidance.

Q: Can you discuss the trends in energy transition and green projects in the US, especially with upcoming elections? A: Hinda Gharbi, CEO: We see strong momentum in solar projects in the US, driven by policies to triple renewable capacity. The elections have not yet impacted project pipelines. We continue to see opportunities in solar and wind energy.

Q: What is the impact of the B&I divestment in China on margins? A: Francois Chabas, CFO: The divested business was dilutive to the B&I segment. Its exit will improve the division's margin. The divestment aligns with our strategy to focus on higher-growth and higher-margin assets.

Q: How do you view the potential impact of US elections on the testing business, particularly if tariffs are reintroduced? A: Hinda Gharbi, CEO: We are mitigating risks through geographic diversification and sectoral expansion. The potential tariffs might accelerate supply chain shifts, but our strategy is to diversify and reduce dependency on any single region.

Q: Can you explain the strong growth in the Middle East and Africa? A: Hinda Gharbi, CEO: Growth is driven by double-digit increases in oil and gas activities, supported by our strong regional presence and capabilities. We are also diversifying into B&I and certification services, contributing to robust performance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.