Large, publicly held testing, inspection and certification companies recorded solid growth last year but also continued to restructure operations. Two of the largest such companies are Intertek and SGS, which share a long history in the testing services business and diversified offerings serving a wide range of industries.

Intertek, a provider of testing, outsourcing, certification, training, inspection, advisory and quality assurance services, recorded revenues of more than £2 billion ($3 billion = £0.63 = $1) in 2012. Revenues rose 8.6% on an organic basis at constant currency rates. Organically, in constant currency, revenues for the company’s Industry & Assurance, Commodities, Consumer Goods, Commercial & Electrical, and Chemical & Pharmaceuticals businesses grew 10.4%, 8.6%, 7.3%, 8.7% and 9.0% respectively.

Reported revenues rose 17.4%, boosted by the 2011 acquisition of technical services firm Moody International (see IBO 3/15/12). On a pro-forma basis, which includes Moody as if it had been part of the company for all of 2011, 2012 organic revenues increased 10.5% in constant currency. The Moody acquisition added to Industry & Assurance’s sales growth.

Last year, Intertek completed six acquisitions. Organic capital spending for Intertek grew 42.0% last year to £115 million ($183 million), as the company opened 30 new labs and expanded 23 labs. New labs included a facility in Portugal for food, water microbiology and nutritional testing; a coal testing lab in South Africa; and new microbiology and in vitro testing capabilities at its Chalon-Sur-Saône, France, facility. The company also undertook a £22 million ($35 million) restructuring plan, affecting operations in 17 countries, with a focus on Europe. The firm recorded £14 million ($22 million) of the savings in 2012.

Part of Intertek’s Commodities segment is its petroleum services business, whose services include inspection, materials analysis, asset integrity management, corrosion control and safety for petroleum exploration, production, distribution and transportation. Lab services, including analytical services, is an integral part of the business. “Intertek is well known for a wide range of analytical services for the petroleum and petrochemical industry,” said Darryl Jesionowski, general manager of Laboratories, Americas, at Intertek Commodities. “These include testing for physical properties, composition, trace contamination, purity, elemental content, qualitative assessment and others.”

In the past 12 months, analytical testing demand at Intertek’s petroleum services business has been led by testing related to emissions and shale gas, according to Mr. Jesionowski. “With the emphasis on greenhouse gas and other emissions, we have seen an upswing in analysis such as testing for sulfur content and vapor pressure,“ he said. “Additionally, the increase in production, storage and transportation of crude oil and gas from shale has the industry looking at composition of both products. Hydrogen sulfide content is being monitored for safety reasons.”

US shale gas extraction and production is also affecting Intertek’s testing business in other ways. “With shale areas being explored throughout the US, the number of sites that analysis requests can originate from has increased,” explained Mr. Jesionowski. “Many of these did not have a laboratory in close proximity. Intertek has opened facilities and is delivering lab services in these regions.” In May, Intertek announced the expansion of its operations in North Dakota to support the Bakken shale oil region, including a new lab for crude oil and natural gas testing.

Other trends affecting Intertek’s US testing business are tied to regulatory requirements. “The EPA’s new Tier 3 Emissions Standards continue the direction set out initially by the Clean Air Act and Tier 2 Standards to evolve gasoline and motor fuels,” said Mr. Jesionowski. “With the sulfur content being driven lower, the challenge is to deliver production results at what used to be considered trace levels.”

Intertek’s petroleum testing labs regularly add new methods as they are approved, according to Mr. Jesionowski, and Intertek participates in the subcommittees of industry and standards bodies. New methods under development in North America include those addressing crude oil quality. “There have been interesting developments in chloride content and light ends [low molecular weight organic compounds] analysis coming from these joint discussions,” he said.

Asked about the effect of regional differences on the petroleum analysis business, Mr. Jesionowski told IBO, “Intertek’s global coverage allows us to harmonize analytical delivery to the petroleum industry. Countries that were once importers are now exporters and vice versa,” he explained.

SGS offers services for inspection, testing, certification and verification. SGS 2012 revenues increased 0.8% to CHF 5.6 billion ($6.0 billion = CHF 0.94 = $1). However, organic revenues rose 10.2%, as currency contributed 1.8% and acquisitions added 4.3% to growth. The company’s operations are divided into 10 businesses. Among the company’s businesses that offer lab testing services are Agricultural Services; Minerals Services; Oil, Gas & Chemicals Services; Life Sciences Services; Industrial Services; and Environmental Services. In constant currency, 2012 revenues for these respective businesses increased 6.6%, 15.6%, 18.7%, 3.6%, 16.1% and 5.8%. Organic revenues rose 11.0%, 13.8%, 11.6%, 9.5% and 6.6% for Agricultural Services; Minerals Services; Oil, Gas & Chemicals Services; Industrial Services; and Environmental Services, but declined 0.9% for Life Science Services. However, revenue for Life Science Services’ lab operations grew 15.5%.

SGS acquired 18 firms during 2012. Capital spending increased for all 10 SGS businesses in 2012. Minerals Services investments jumped 23.2%, with lab investments for a mineral processing facility in Perth, Australia, a new facility for geochemical sample preparation in Myanmar, the addition of more than 125,000 square feet of new mineral lab space in Canada and an expanded geochemical lab in Colombia. In total, Mineral Services added 20 new labs during the year.

Capital spending for Industrial Services, Agricultural Services, Environmental Services and Life Sciences Services increased 8.3%, 5.9%, 5.4% and 4.9%, respectively, in 2012. Capital spending for Oil, Gas & Chemical Services also rose in double digits, growing 19.6%, with a focus on well-site equipment services, lab capacity, and facilities for mechanical sampling. A new Chennai, India, facility houses labs for pesticide, environmental, mineral, and food and agricultural testing, as well inspection and audit services.

SGS recorded a pre-tax restructuring charge of CHF 68 million ($72 million) in 2012. The Life Sciences Services business accounted for 42% of restructuring costs, due in part to the closure of a Paris clinic. Environmental Services; Oil, Gas & Chemical Services; Minerals Services; and Agricultural Services accounted for 13.2% 10.3%, 7.1% and 1.0%, respectively. For all of SGS, location closures and cost optimization represented for 51% and 44% of restructuring costs, respectively.

SGS Environmental Services’ offerings include environmental assessment and monitoring, risk assessment, data management, interpretation and monitoring, and lab analysis. The company offers services for air, soil, water, waste and climate change. Nicolas Kyndt, Global Business Development and Planning manager at SGS Environmental Services, told IBO that the business is well known for traditional testing services, including microbiology testing and testing of organics and inorganics, as well as higher resolution testing services. These investments in higher resolution testing capabilities is a differentiator. Last year’s acquisition of US-based Analytical Perspectives, which had 33 employees, gave the business capabilities in the area of isotope dilution technology and high resolution GC/MS for ultra-trace analysis. The company also operates the Institute for Applied Chromatography in Belgium, whose services include testing for micropollutants and persistent organic pollutants.

Asked about specific testing capabilities, Mr. Kyndt said, “For example, today, we’ve got very large capabilities around dioxin and furan testing. We also, through a recent acquisition, are very well positioned in radioactivity testing, and more and more we are developing our laboratories, as I said, in these high end, new-age contaminant testing capabilities.” In 2012, SGS purchased 20-person radiation testing firm Australian Radiation Services and 100-person Brazilian occupational health and industrial hygiene lab Environ Cientifica. An example of contaminants requiring higher end testing are pharmaceuticals, hormones and personal product residues in wastewater, according to Mr. Kyndt.

In the past year, SGS Environmental Services has experienced particularly strong demand for lab testing services related to the mining and oil and gas industries, according to Mr. Kyndt; in particular, testing needs related to shale gas in the US and oil sands in Northern Canada. He also emphasized the business’s global presence. “Most of our growth came from our very diversified geographical footprint around the world,” he explained. “The air and the water markets are really, for the moment, big opportunities in Asia and South America . . . I would say, in Asia, it is very much around the manufacturing activity over there, so all of the industry and the plants having to monitor their wastewater or their indoor air quality.” In Africa and South America, mining operations are driving growth, he said.

Although regulations vary worldwide, testing requirements can be standardized according to business practices, said Mr. Kyndt. “[W]e are dealing on a daily basis with large, multinational corporations, and as part of their corporate vision and their corporate sustainability requirements or goals, we see a lot of these corporations—for example, mining corporations—that try to apply some goal or corporate standard in terms of testing, going way beyond the local regulations.”

SGS’s diversification in many end-markets also contributes to the opportunities for the Environmental Services business. “This is one of the bigger differentiators: because we are so well positioned with a global corporation through our [other businesses], like oil and gas or mineral, when we are talking with procurement offices or with plant managers and talking about their oil testing or geochemistry testing, very often we can also, at the same time, sell our environmental services,” said Mr. Kyndt.

Asked about environmental testing trends, Mr. Kyndt noted an greater emphasis on quality, in particular as it relates to new contaminants and lower detection limits. “[W]e see more and more requirements from the regulators to have more information on the way the tests are performed and which quality controls have been put in place to make sure the results are trustworthy.” New data management systems are also helping meet this need. “[W]e want to give [customers] electronic access to their data with a high level of quality checks, customization and visualization options: a data management system where the end-user can have electronic access to all their results and tests on line, through web portals, secured and accessible 24/7.”