Good morning, and welcome to the SGS third quarter 2026 sales update. I am here with Géraldine Picaud, our CEO, and Marta Vlatchkova, our CFO. Please note that this call is being recorded and will be available for replay on the SGS website. Throughout today's presentation, all participants will be in listen-only mode. The presentation will be followed by a Q&A session, and you can register for questions at any time by pressing star one on your keypad. I would now like to turn the conference over to Géraldine Picaud, CEO of SGS.
Thank you, Ariel, and good morning, ladies and gentlemen. Welcome to this conference call about our Q3 sales. As usual, I will drive you through the highlights of the quarter, and then I will hand over to Marta for more detailed information about the sales. Let us start. Our Q3 sales are very close to CHF 2 billion, a global increase of nearly 15% compared to Q3 2025. We are very happy with this record number, which demonstrates that SGS is in the right position to capture the growth opportunities. This excellent total growth results from a strong organic growth of 5.7%, combined with a scope effect of 6.9%, mainly attributable to ATS, further helped by a positive foreign exchange amounting to 2% over the quarter.
The first two drivers we have identified in our Strategy 27, Digital Trust and sustainability, have confirmed their role of growth engines. You will see that we have achieved a major step with the acquisition of Prescient. This deal gives us access, in particular, to the high-growth market in the U.S. of the SOC 2 certification, which guarantees the security of the company's IT systems. Other bolt-on acquisitions also significantly contribute to the growth. We have signed four more deals since last time we met in July for our H1 results.
Finally, we are well on track with our guidance, and I am happy to confirm our initial outlook for the full year. Now, some recent updates about Digital Trust and IMPACT NOW. Starting with Digital Trust, I already mentioned the acquisition of Prescient Security, which reinforces significantly our position on the cybersecurity market for companies. I will give you more insight on Prescient in a minute. The acquisition of NetSentries is also an achievement in the same area.
NetSentries provides security assessment and cyber risk management services. Now talking about our organic business, Brightsight, that you know well, is about to become a Notified Body under the European Union's Cyber Resilience Act. This regulation dictates manufacturers to demonstrate the compliance of their connected products across their life cycle with mandatory cybersecurity requirements. We are also very proud to have issued the first internationally recognized cybersecurity certification of a medical software, a laser ophthalmoscope. On IMPACT NOW for sustainability now, we also registered a lot of successes actually.
More specifically, for instance, we have captured opportunities coming from new regulations implemented in Europe. We achieved accreditation for the CBAM and already signed contracts. New regulation about Packaging and Waste has become applicable in August, creating a sustained multi-year pipeline for growth. Finally, we have secured our first clients, and a growing demand arising from the regulation around deforestation and the Sustainable Biomass Program. Now let me share some insights on Prescient Security. Prescient Security is a leading provider of cybersecurity and digital compliance services in North America.
This acquisition is an important step in expanding our Digital Trust offering for enterprises and strengthening our position in this attractive and fast-growing market. Prescient Security is accredited to deliver SOC 2 attestation services, which are becoming a business requirement for technology companies and their customers in demonstrating robust controls around security, reliability of their systems, and protection of customer data. Together with our other acquisitions, SGS has the most complete portfolio of Digital Trust certifications among the TIC companies and reinforces our ability to offer clients a comprehensive portfolio of cybersecurity, assurance, and compliance services.
I look forward to discussing this exciting development during our Capital Markets Event in November. Over the past three months, we have concluded four additional acquisitions. I already commented on Prescient Security and NetSentries. In Chile, as you can see, we've invested in Konatec, which support mining companies, thanks to unique rheology measurement solutions. In Spain, DOEL is a specialist in testing and inspection for electricity transmission. So fast-growing business. I would like to warmly welcome the experts and the employees of these companies to the SGS family. Let me now share some key highlights from our business lines, and let's start with Industries & Environment.
You can see here our Industries & Environment business line delivered solid organic growth with 3.6% and sales amounting to CHF 697 million . Environment recorded strong growth thanks to increased demand for environmental compliance testing such as PFAS water quality assessment and emissions monitoring across North America, Asia-Pacific, and Europe. Inspection, supervision, and safety grew at a high single-digit rate with new solar energy projects and infrastructure inspection projects in airports and urban housing developments in India.
In the third quarter, we also signed new contracts in the data center sector across multiple regions and continue to see strong growth in renewable energy projects in Latin America. Industrial testing was softer, reflecting the disruption in the Middle East and a demanding comparison basis. Lastly, acquisitions continue to deliver strong performance, including ATS. Natural Resources now delivered a strong organic growth of 6.2%, with sales amounting CHF 448 million , an increase over 10% versus 2025. In minerals, we accelerated growth supported by all regions with new geochemistry on-site projects.
The demand was high for gold, copper, and iron ore all over the world. In addition, minerals trade services performed very well, driven by new projects in North America related to industrial minerals and rare earth commodities. Growth was also supported by inspection projects for gold and critical minerals in Asia-Pacific. Agriculture was stable despite seasonal challenges in Europe. Oil, Gas & Chemicals remained resilient.
Double-digit organic growth in both North America and LatAm offset trade route disruptions caused by the Middle East situation. Connectivity & Products delivered an excellent organic growth of 9.2%, with sales of CHF 385 million in the quarter. Connectivity grew at a high single-digit rate, led by wireless testing growth for new mobile and Wi-Fi products. Strong growth was recorded in emerging markets such as Brazil's ANATEL services, for instance, cybersecurity services, and automotive technical evaluation for autonomous driving systems.
Softlines deliver double-digit growth driven by strong demand for compliance testing across textiles, footwear, accessories, including notably the PFAS solutions and durability testing. Hardlines also delivered double-digit growth with renewed momentum in toys and strong demand for food contact material testing. The new European Union regulation is creating additional demand as clients prepare products and packaging to be compliant with these new waste reduction and recyclability requirements.
The trade facilitation services remain soft, affected by disruption to trade flows linked to the Middle East situation. Health & Nutrition delivered strong organic growth of 6.2%, with sales amounting to CHF 239 million . Food achieved, again, double-digit growth driven by continued very strong demand for food contaminant testing and advisory services. Growth was supported by increasing consumer awareness around food safety and the adoption of the food labeling requirements across Asia-Pacific.
Pharma recorded moderate growth in the third quarter with a double-digit increase in biosafety, while project delays in European clinical research remained a constraint. Cosmetics and personal care posted solid results, supported in all regions by improved demand for derma cosmetics testings and scientific data-backed consumer claims. Business Assurance now delivered 4.2% organic growth, with sales amounting to CHF 213 million .
Certification recorded moderate growth impacted by audit delays due to some extreme weather conditions in East Asia. Sustainability grew high single digits, supported by new client wins and a growing demand for sustainability regulatory advisory services. Digital Trust assurance achieved double-digit organic growth, and we secured strategic customer wins, including landmark AI and healthcare data security certifications for multinational technology corporations. The training revenues were soft during the period due to a delay in the release of the new ISO standards. With that, I will now hand over to Marta for the sales review.
Thank you, Géraldine, and good morning to everyone. In the third quarter, we achieved record sales of close to CHF 2 billion , up by near 15% compared to last year. When we compare in constant currency, the sales grew by 12.6%, of which 5.7% from the strong organic growth and 6.9% from M&A, which included ATS. On the Forex side, our reporting currency, the Swiss franc, although still very strong, depreciated on average by 2% compared to the currencies in which we operate. Now, should we report our Q3 growth in euro or U.S. Dollar, we would have seen broadly similar growth rates. The 14.6% sales growth in Q3 in Swiss franc is equivalent to 14.7% in euros and to 12.9% in U.S. Dollars.
Let's now turn to the sales breakdown by region. In testing and inspection, the growth momentum in Asia- Pacific continued with 9.3% organic growth. Health & Nutrition expanded double digit, while connectivity and products and natural resources grew by a high single digit. Europe expanded by 2.4% organically, driven by food, environment, minerals, and connectivity and products. This was partially offset by soft volumes in pharma, agri, and oil and gas. North America grew by 5.4% in Q3 with strong performance in connectivity and products, food, environment, and natural resources.
Eastern Europe, Middle East, and Africa expanded by 5.1% organically. Although the situation in the Middle East remains highly volatile, we saw an improvement from the low point in Q2, notably in connectivity and products and food. In addition, geochemistry benefited from high demand for gold, copper, and iron ore across the region. Latin America expanded by 7% organically, with continued double-digit growth in geochemistry and new projects in inspection and supervision.
Finally, as commented earlier by Géraldine, Business Assurance delivered 4.2% organic growth, led by Digital Trust and sustainability, partially offset by moderate growth in certification. Looking now at the nine months, I am proud to report that we delivered 10% sales growth to reach CHF 5.7 billion. In constant currency, the sales increased by 13.1%, of which 5.6% thanks to the strong organic growth and 7.5% from M&A, including ATS. On Forex, despite the recent depreciation of the Swiss franc, the overall impact for the nine months remains - 3.1%, bringing the growth in Swiss francs to 10%. With that, I hand over back to you, Géraldine.
Thank you, Marta. Again, this quarter, we are well on track with the guidance. The success of our acquisition policy and ATS allow us to achieve the top end of our initial outlook on scope effect. You see here we are now guiding for growth from acquisition around 7%. We fully confirm all the other items of the guidance, and I am very excited to see you in Berlin in less than one month to discuss about what we expect for the coming years. Thank you. We will now open for the call for questions. Please, Ariel.
We will now begin the question- and- answer session. You can register for questions at any time by clicking the Q&A button in the webcast and then pressing star one on the virtual keypad. If you are joining by phone, just press star and one. Please limit yourself to a maximum of one question and one follow-up. One moment please for the first question. Our first question comes from Rory McKenzie from UBS. Please go ahead.
Morning, Géraldine. Morning, Marta. I wanted to ask a question about the Digital Trust services. Clearly, you are investing heavily into this area, and the news right now is really dominated by cybersecurity risks and threats. Can you just explain where you sit in this sector? What capabilities are you putting together, and how do you see client demand evolving? How is that been trending through this year? Thank you.
Well, thank you, Rory, for the question. Clearly, when you look at the TIC industry, the fast-growing sector of the TIC industry is undoubtedly the Digital Trust services. Whether you consider it from an industrial aspect or from an enterprise aspect, which is what Prescient is serving, or from a Digital Trust for products, connected products, this is a very fast-growing portion of the TIC industry. It is a clear new growth opportunity that we set as early as when we presented Strategy 27 back in January 2024, and we are going to continue to invest in this fast-growing segment.
All the organization are deploying AI systems, autonomous vehicle, connected medical device, industrial Internet of Things platforms, smart infrastructure, traditional product testing. All this, it is no longer sufficient. We need to have on top the check of the AI model safety, cybersecurity resilience, functional safety, software integrity. All this is key topics that we want to continue to serve and invest into. So it is a very fast-growing, strong double-digit growth, and we are undoubtedly the leader of the industry when it comes to cover all the needs of our clients when it comes to Digital Trust. We will come to that in the CME, and we will explain that even further.
Okay. Thank you. Then just a second question, just to clarify something Marta said about FX. I think you said, well, the last time you saw a tailwind was literally nine years ago, so we have not had to model a positive impact for it for a long time. In H2 at the current Swiss franc rate, would that be a positive impact for margins on the translation and the mix?
Yes, Rory. I confirm that you saw we have a positive Forex in Q3. To prevent, should the rates remain at the current levels, we should expect similar for Q4. This would mean that indeed we have no more this Forex headwind in the margins. But looking at the second half, I remind that in the first half it was still there. So for the full year, you should expect rather neutral impact.
Yeah. That's clear. Thank you.
Next question. Thank you, Rory. Next question.
The next question comes from Annelies Vermeulen from Morgan Stanley. Please go ahead.
Hi. Good morning, Géraldine. Morning, Marta. My first question is just on Business Assurance, which has been improving nicely through 2026, as you had guided for. I know you talked about the weather impact in Asia. Can we assume that the majority of the slightly slower Q3 was that weather impact, and therefore would you expect that to catch up in Q4 and return back to more of a normal growth rate?
Yes. Hi. Good morning, Annelies. Look, we had the impact. We have effectively all the typhoons and all the floodings that happen in East Asia, which you have to have auditors on site, so they could not go on site. It's always an impact on our Business Assurance. In Asia, we had also quite a sluggish Europe macroeconomy also. That's impacting core certifications and industrial sectors, automotives, and even if our business in France is really marginal, but that was also impacted. Look, I'm really expecting a full normalization of all this and back to mid to high single digit growth, at least for 2027. Q4, we should be a bit better, but I'm really betting on 2027 for BA.
Perfect. Very clear. Secondly, I just wanted to ask about data centers. You mentioned that you signed some contracts in I&E. How much did that contribute to growth in that division? Can you comment a little bit on the pipeline there? Do you expect that to continue to become a larger part of I&E? Thank you.
Yes. Annelies, data centers is not only impacting I&E. It is impacting I&E favorably. It is, I would say, a tailwind, but it's also impacting BA, it's also impacting connectivity and products. Everything we have across our verticals are impacted favorably by the data centers because we have an offering that's quite complete. From the very beginning, the initial risk assessment, the environmental due diligence that you have to do, the supply chain management, the construction supervision, the control of Health & Nutrition, that's all I&E. By the way, we have a lot that's done also by ATS in North America.
All the hyperscalers, they really value our expertise for these services through all the testing programs for key equipment and safety, the EMC, the reliability, the connectivity, the energy management for the servers, the energy storage, the data integrity. That's connectivity and product. You have the building, and you have all the devices you put inside the data centers, so the servers, the connected equipment, and that is C&P.
When all is operational, we continue also to support the clients with certification around the governance, the business continuity, and the cybersecurity, and here you have Business Assurance. Some of the tailwind of 2027 for Business Assurance is really around the Digital Trust, and that is also the rationale for Prescient Security. Yes, we are doing a lot for data centers, and this will continue to be one of the growth drivers that we benefit from as we go towards 2027.
Very clear. Thank you.
Thank you. Next question.
The next question comes from Will Kirkness from Bernstein. Please go ahead.
Thanks. My first question probably follows on from that. You had a very impressive performance in C&P. I just wondered how sustainable that level of growth was, whether there are any contract wins in there, or if that is all existing customer strength.
Yeah. Sure, Will. Look, as explained during the call, we are really about the sustainability related like PFAS and the new regulation that drove the growth, like the PPWR, the Packaging and Packaging Waste Regulation. That is really what drove the organic growth that you have seen. North America, there is a growing number of states that are implementing PFAS-related requirements for apparel and consumer products. That creates a strong demand. Is it going to fade away? No, I do not think so. I think it is going to remain, and going to remain super strong. The outlook for Q4 is super high, is super strong, and we probably took some market share as well.
Okay, clear. Thanks. If I could just follow up on your, you made a comment on ATS in your prepared remarks. I just wondered if you could talk about how that is, any details you could give on that, how it is growing, margins, what you have done on costs, or whether you have managed to get any revenue synergies yet. Thanks.
Yes. We are getting some revenue synergies, and we are ahead of plan when it comes to the synergies and whether the cost synergies or the revenue synergies. The business is doing fantastically well. You are going to meet the guys in the Capital Markets Event in Berlin, so hope you are coming, Will.
Yeah, I will be there. Thank you very much.
Okay. Thank you. Next question.
The next question comes from Virginia Montorsi from Bank of America. Please go ahead.
Good morning, and thank you for taking my question. I just had one quick question around the Capital Markets Day. I appreciate, obviously, it's one month away, but when I think about your commentary in the last couple of months around margins, I think you've openly said that you've got this 16.2% margin target for 2027.
But of course, having a Capital Markets Day a year earlier means likely some of these targets are going to be hit a year earlier. When you think about your margin expansion, can I ask you, how are you starting to think about your operating leverage, the benefit you've had from cost savings, where do you go from there? Can you help us understand how we should think about your margin expansion? Thank you.
Thank you, Virginia. Look, really the operating leverage is there, and we're working on it. We will, I think, more detail when it comes to our margin evolution at the next Capital Markets Event. So I'm just asking a bit of patience. We will go on this topic in the CMD, if you allow me.
Okay, fair enough. No worries.
Yeah. Thank you. Next question.
The next question comes from Tom Burlton from BNP Paribas. Please go ahead.
Yeah. Hi, Géraldine. Hi, Marta. Thanks for taking my questions. My first one is just on the Middle East, please. I know you said it hit industrial testing, trade facilitation, and OGC. Just wondering if you could size the combined drag on Q3 organic growth from the Middle East. Then just thinking sort of on current run rate, what is your best guess on how it impacts Q4? Then maybe just if you could, a more general comment on the shape of organic, as you see it now for Q4, please.
Right. Okay. The shape of organic for Q4, I take it, and then I will give the Middle East question to Marta. Look, we are on track. I said we are on track. We feel quite good about Q4, actually, Tom. We are all focused on delivering another good quarter and finishing the year with style and properly. So bear with us. On the Middle East, Marta?
On the Middle East, I just wanted to remind that overall our exposure is relatively small, less than 2.5% of group sales and people. The situation remains highly volatile, but nevertheless, in Q3, we saw slight improvement from the low point in Q2. It was thanks to better food and connectivity and products volumes. Now, from overall Q3 impact at group level, the impact is 30 basis points negative in Q3, which brings that to 50 basis points for year- to- date. So you see the impact is slowing down, reducing. But will this be there in Q4? I must say yes. So expect from where we see now around 30 basis points negative impact similar to Q3.
That's helpful. Thank you. I just had one follow-up on Europe if I can.
Yes, sure.
You mentioned the European macro softness, and just thinking about that 2.4% organic in Europe. In absence of any kind of macro help and macro improvement, how confident would you be about a sort of an improvement in Europe into 2027 given some of your own kind of initiatives and contract momentum, et c?
Yeah. We remain confident because we're going to have some tailwinds coming in 2027 for Europe. As we're developing offering around cybersecurity, we are targeting defense, aerospace, and all this offering is going to help. So we are fairly confident that we can do better than 2.4% as we go to 2027.
Great. Thank you very much.
You are welcome. Next question.
The next question comes from Victoria Chang from JP Morgan. Please go ahead.
Hi. Thanks for taking my question. My question is on Health & Safety . The 6.2% organic growth was strong, but sequentially a little bit slower versus 2Q. Can I ask about what the moving parts were in explaining that? It feels like food remains very, very strong. What is kind of the pharma landscape looking like right now, and how do you see growth progressing into 4Q? Thank you.
You mean Health & Nutrition. You said health and services.
Oh, sorry, Health & Nutrition. Yes.
Health & Nutrition. Look, we have got an incredibly great performance in food at double-digit growth, and we are very proud about that. We see it continuing because there is a strong and increased demand across all geographies for food contaminants and safety testing, and you got this mega trend around consumer awareness, consumer wellness, GLP-1, proteins. All this is really fueling the growth across North America, across Europe, across Asia. This, we see it definitely continuing, of course, in Q4 and beyond Q4.
What we saw in Q3 that offsetted this super trend is pharma actually. Pharma grew moderately due to the clinical research project delays, notably in Europe. That was really the most impacted area. What we see as an outlook is that there is a recovery happening in the U.S. with the reindustrialization, and we see it picking up, and in Europe, we are seeing drug development activities kicking in. It takes time, and it is always frustrating the time it takes, but we see it starting. I gave the example of biosafety. Okay, it is a small portion inside Europe, but still biosafety, we are kind of unique with that, is double-digit growth. We see it continuing and gaining momentum and we are very positive for Health & Nutrition business line.
Great. Thank you.
Thank you. Next question.
Our last question comes from Neil Tyler from Rothschild & Co. Please go ahead.
Yeah, good morning. That is appropriate. I wanted to ask about the same thing actually, Géraldine. Perhaps a little bit more detail on the pharma business, because I think previously when you talked about biosafety, you talked about repurposing some laboratories in North America to be able to offer the same capabilities. I wonder if you could update us on that initiative and whether that is underway and biosafety in North America is also contributing. Then, just quickly give some sense of the split of the pharma business between the different sides in Europe and North America, please.
Yes. Okay, Neil. We are on track with our development of biosafety services in the U.S., but it takes time. To be frank, we do not have revenues yet that are anything of material as we speak. It is in progress. When we are talking about the weight between Europe and North America in our pharma business, it is kind of 50/50, I would say. It is kind of really balanced between U.S. and Europe. We have a little bit of APAC as well, to be complete.
Okay. Thank you very much.
You are welcome. This was the last question, I will now conclude by telling everyone that we have delivered Strategy 27 a full year ahead of schedule, reestablishing SGS as the undisputed leader of our industry in both scale and growth. We are leading in the market, shaping the future from Digital Trust and AI to data centers and sustainability. I look now forward to welcoming you to our Capital Markets Event in Berlin on November 17th and 18th, where we will set out how we will continue to extend our competitive lead. Thank you everyone. Bye-bye.