Israeli & Canadian Pharmaceutical Companies Leapfrog their way to the top Teva, Valeant VRX game changing drugs ms

Attention investors: take a long hard look at Teva Pharmaceutical Industries of Jerusalem and Valeant Pharmaceutricals of Montreal - you won't regret it !

Just last week nyse:TEVA paid $40.4 billion for Allergan's nyse:AGN generic drug business giving the world's largest generic drug maker an even bigger international presence (Allergan was/is present in more than 100 countries).

This also gives them more leverage because more revenue spreads fixed costs over more units of output - which is important in the business of low margin generic drugs.

Though ms drug Copaxone faces increased competition from Novartis and Momenta among others, their proprietary brand continues to grow (last quarter both in terms of sales +12% = 50% of company profit and about a fifth of company revenue) and share of the market for MS prescriptions (31%) - thanks in part to more innovative ways of introducing the drug to patients (3X a week 40mg version vs 6X by competing brands).  And don't forget about the over-the-counter products - Teva has hugely benefited from key partnerships with companies like Proctor and Gamble and even Canada's Life brand (Shoppers Drug Mart).  For instance in Canada products include sea salt for baths.

Another overlooked aspect of the company - it is deeply rooted in Israel and has strong connections with Israeli universities - this is key since these institutions are credited with having developed important drugs such as Copaxone and Azilect.

Financials - Teva was doing well even before taking into considering recent acquisitions - in GAAP terms operating income and net income more than doubled last year despite revenue being stable.  All major metrics have been stable since 2010 with non GAAP earnings per share up steadily : 4.54 in 2010, 4.97 in 2011, 5.01 in 2013 to 5.14 in 2014.

Teva - making Israel proud : The deal for Allergan is the biggest in Israel's corporate history !

Valeant Pharmaceuticals nyse: VRX - merging its way to the top one company at a time - acquiring game changing drugs

According to CEO Mike Pearson, Valeant remains focused on medium sized acquisitions - this, despite the fact that the more recent deals have been game changing (Salix Pharmaceuticals ltd for $10.1 billion) and the tug-of-war for control of privately held botox maker Allergan plc.

July 2015 - Just this month Valeant took control of one of Egypt's leading drugmakers Amoun Pharmaceutical by taking over parent company Mercury Holdings ($800 million deal).

Alexion Pharmaceuticals Inc ALXN Organic Growth Potential Kanuma, Transforce Inc TFI a powerhouse trucking company acquisitions

Alexion Pharmaceuticals (ALXN) is a global leader in the development and commercialization of transformative therapies for patients with rare diseases.  Since taking over Synageva Biopharma (GEVA) the company now operates in more than 50 countries.

Last year at this time Alexion was rumored as a takeover target - today it is the one doing the takeovers !

ALXN experienced lots of organic growth during the past few years and that isn't expected to change with little to no competition (thanks in part to successful takeover bids for rivals Enobia and Synageva Biopharma Corp (GEVA).  Also notable is that the company has high institutional ownership (97%) meaning that many of its shareholders are leading investment firms.

What is clear is this - the company is growing fast and no wonder

• it owns the patent rights to three of the hottest (and priciest) drugs on the market for rare diseases: Kanuma (treats LAL a life threatening disease caused by genetic mutations leading to liver and other tissue problems), Soliris ($2 billion in revenue last year just from this one drug) and Eculizumab.  Its latest acquisition has eight other product candidates including one relating to enzyme replacement therapy for patients with MPS a genetic metabolic disease - 30 pre clinical programs in total.
•  recently initiated multinational trial of Eculizumab for prevention of delayed graft function.
•  is on an acquisitions spree !  and the takeovers are aggressive and that's leading to more successful bids.
• June 2015 acquires Synageva for $8.4 billion
• average price target set by the sixteen major equity research groups is $210.07 or 28% higher than the stock is currently trading at.
• price remains above the most conservative estimate of $173 set by Citigroup.
• cost savings from acquisitions will allow it to spend more in the future
• between June 2014 and March 2015 the company's cash and equivalents rose by 50% to $916.81 million with total debt down 40% to $45.5m and long term debt down to zero.
• only drawback is that there are dividends.

latest financials
-- 1q2015 Alexion revenue of $600.3 million beats estimates ($594.4 million).  Earnings were as expected ($1.28 vs $1.32 est).

 

Montreal-based Transforce Inc (TSX:TFI) another growth stock

Canada's largest trucking company has grown into one of North America's three largest transport companies.

notes

• significant growth stateside in just four years (key acquisitions include Dynamex, IE Miller, Concord Transport).
• May 20, 2015 - acquires US based Hazen Final Mile, a last minute delivery company.
• takeover of Contrans Group ($580 million, early 2015) makes TransForce a powerhouse in Canada.
• unlocking value from its waste management business presents unique opportunity for organic growth.

2014 the year of Canadian Technology and Services Stocks CAE Inc, Constellation Software, CSU, OTEX, TSX (aviation training, software, growing companies, acquisitions)

CAE Inc (nyse:CAE) - aviation stocks, aviation training services, aerospace industry, healthcare sector

This year CAE Inc of Montreal became one of the world's largest simulation technology companies.  Its business is arguably the most diversified in the training services sector - at just under 200 locations in over 30 countries the company offers training services for pilots (civil aviation, defence), and manufactures key simulation technology for healthcare and security agencies.  50% of revenue comes from the sale of products (simulators and related technology) with the rest coming from services (aircraft operations training - over 100,000 civil and military personnel).

 

why this stock ?  it's low risk !

Among industry observers CAE enjoys a rock solid reputation.  It's extremely diversified (does not rely on a single market sector or customer), owns unique technology that has quickly become a mainstay in global aerospace training.  Business from healthcare is strong (hospitals and universities).

• a global leader
• the leading provider of commercial and helicopter aviation training services worldwide - second leading provider of business aviation services - market leader in key regions of China, India, South America
• highly exposed to the growing defence and security sector (6% increase in revenue quarter ended September 30, 2014 - thanks to more activity in north amerca, europe and asia).
• secured new contract to train the US Air Force
• four consecutive years of revenue growth (2,114.90 2,035.20 1,821.20 1,630.80)
• four consecutive years of dividend growth (0.22 0.19 0.16 0.15)
• earnings up 38% last fiscal year (March to March) to $190 million.

nyse:CAE

1-year  6-months  3-months  1-month

1.2%  (1.4)%  6.8%  (1.2)%

Constellation Software Inc

2014 was a great year for Constellation Software Inc of Toronto (tsx:CSU).  The stock is up 60% for the year, bringing the market capitalization of the company to just under $8 billion and for good reason - in the latest quarter

- revenue is up a hefty 33% to $419 million (acquisitions accounted for all but 4%).

- earnings up 44% to $32 million vs $22m (per share $1.51 vs $1.05).

- adjusted ebitda up 73% to $100 million.

it's not just that last quarter either that has investors gleaming - over the last nine months adjusted ebitda is up 55% to $244 million.  net income up 26% -> $64 million.

what I like about the company 

it manufactures market leading software and has exposure to a number of industries (public and private).  the software it provides is critical making its products invaluable (meaning there are few if any alternatives - makes for more reliable customers).  Annual revenue recently surpassed $1 billion ! and quarterly growth is light years ahead of the competition (over 50%).  For a company with a market value over $7.3 billion it's an amazing feat to record 60% growth in stock price in just one year.

tsx:CSU    stock price change

1-year   6-months 3-months 1-month

 59.48%  27.02%       21.35%    4.19%

Open Text Corporation of Waterloo, Ontario  (b2b services, yahoo) - nasdaq:OTEX

2014 was a wonderful year for Open Text Corporation - It's New Year's Eve and year-to-date the stock up 28% to $58.26 (market cap at $7.2 billion on the nasdaq).  Like other Canadian success stories

Electrolux eluxy Doubles US Market Share (whirlpool whr), Jaguar Tata Motors ttm Organic Growth China luxury vehicle market

If you're into retail stocks here's one to consider -  Electrolux eluxy aka Sweden's version of Whirlpool is taking the US by storm.  On September the 8th it acquired General Electric's (ge.n) appliances business for $3.3 billion (7 times ebitda multiple).  The move doubles Electrolux's market share in North America ($4.0 billion in sales -> $10.0 billion) putting it in direct competition with market leader Whirlpool whr.n.

Electrolux is already the number two player worldwide but this deal means a lot given that the US is the world's third largest market for sales of major appliances (2013: 28% of Electrolux sales come from Europe vs 32% stateside).. also note that American demand for appliances is estimated to grow by 9% in 2014 (up from previous estimate 7%).  And don't forget about the $300 million in synergy cost savings.. increased profitability right off the bat !  Less competition in the industry could mean higher prices - but even if that doesn't happen, Electrolex will undoubtedly have more control over the market price of its products.

Electrolux was doing well in North America even before this move - organic growth there is at 7% compared to 0.4% in Europe.  Whirlpool has a market value 40% greater than Electrolux despite having similar revenue;  Electrolux quarterly profit though has been wildly inconsistent.  Annual earnings are comparable to Whirlpool with the exception of 2013 ($827 million vs $93 million) but don't let that bother you - Electrolux is expanding rapidly in emerging markets (also a gradual move in production to low cost regions is estimated to boost 2014 earnings by a hefty $284 million) and the costs associated with that process have been high but, by establishing itself early in those regions Electrolux is setting itself up for the future (and gaining an edge over the competition).

Tata Motors is growing.. very fast

Tata Group (private) is perhaps India's most diversified company.  It sells beverages such as coffee and mineral water, generates electricity for public use, mines salt, manufactures automobiles (both high and low end), provides telecommunications services in India (Virgin Mobile India), is a service company (hotels, airasia, financial services).  Its largest publicly traded subsidiary is Tata Motors nyse:ttm.  In 2012 the auto division was worth $15.2 billion, today it's at $25.2 billion (all organic growth !).

Despite no major acquisitions over the last few years, auto division Tata Motors finally appears to have an asset capable of providing organic growth.  In 2008 it acquired struggling automarker Jaguar Land Rover from Ford for $2.3 billion (today the Jaguar unit represents 95% of Tata Motors' valuation which translates into $23 billion !).  The deal instantly gave Tata a foothold in overseas markets (a plus for a company looking for international recognition) but unbeknownest to Tata, sales at Jaguar Land Rover didn't need much of a push to take off  - between 2009 and 2013 auto sales doubled to 425,000 units ; with 18.8% yoy growth last year.  In 2013 global sales of Jaguar models was up 37% (North America +50% vs -6% the previous year).  Demand from China will have a tremendous impact on future growth (is currently the leading market for Jaguars; will push unit sales up to 1 million by 2020).  Last fiscal year China accounted for 24% of Jaguar Land Rover sales vs 21% the year before.

China is embracing Tata Motors and why not ?  The country has low current luxury ownership rates, rising proportion of affluent individuals, and a strong affinity for premium brands.  

Currently Jaguar represents 7% of all luxury vehicle sales in China (luxury vehicle market); estimates show China's total demand will reach three million by the end of the decade, Tata will account for at least 250,000 units, if its share increases then expect auto sales to rise markedly.
more..  Tata makes electric vehicles and owns South Korea's second largest manufacturer of heavy commercial vehicles (Daewoo has been a part of Tata Group since 2004).  On the flip side Tata Motor's low end passenger vehicle business has fared poorly (sales in India of its own makes including the Tata Nano and Zest are down 33% so far this year 88th -> 58th) but the company is committed to reviving it and has the assets to accomplish that ($7 billion cash, a parent company that both operates leading European and Indian engineering technical institutes and even mines/fabricates the steel used in its cars).

Tata Motors stock price change : 1 mo -10%, 3mo +13%, 6mo +9%

Magna International Expands In India (nyse: MGA)

The largest auto parts marker in North America makes Asia a priority
September 29, 2014 - Magna announces plans for two new facilities to be built in Gujarat, India.  The plants will produce seat systems and body and chassis systems.  Magna already produces various parts in India for GM, Ford, and Nissan.

Magna International (MGA) Reaches Record High On Sales, Gold Companies Get Leaner and BlackBerry's Survival (Fairfax FFH)

       A lot has happened since my last post not the least of which is news of BlackBerry's (bbry) disappointing quarter.  Although I'm confident the company will survive as a private entity within Fairfax Financial (aka the Berkshire Hathaway of Canada), as an investor you have to be frustrated with the way things turned out - BlackBerry has already inked a $4.7 billion buyout deal with Fairfax (ffh) which already owns 10% of shares - at $9 a share the offer gives shareholders almost no return for the tech maker's bes, qnx and consumer handset division :  7500 patents alone are estimated to be worth between $1b and $2 billion, then there's the company's $2.82 billion cash on hand (up $800m from a year ago).  In fact BlackBerry's 2500 security-related patents could form the cornerstone of a new secure enterprise company.

As an investor the deal doesn't make sense, but as a Canadian I'm content with it.  You see, Toronto-based Fairfax is headed by Prem Watsa who is a big supporter of Canada's tech industry (1800 technology firms present in Waterloo and Ottawa, Ontario is North America's 3rd largest tech hub after California and Texas).  If there's any company out there that will give BlackBerry a decent chance to survive intact it's Fairfax (taking company private means it won't be broken up).
Personally, I feel as though BlackBerry can still make it the market - the billion dollar quarterly loss-writedown was blamed squarely on unsold z10 phones, the same phone that holds the distinction of being the company's highest priced device (profit from one phone as much as 3X as much as Nokia Lumia).  The corporate market didn't mind paying more (German government and Nato bought it) but many other consumers didn't -  From the reviews I've read and those of my peers, it's obvious the problem with the phone was the high price not the device !  At times last year even Apple blamed slower sales on the price of its phones.

The good news :  BlackBerry has since launched cheaper devices (q5, z30) and a high-end device with touch pad catering to traditional blackberry lovers (q10).  When BlackBerry gets the price right, the phones will sell.  Blackberry Enterprise Server remains in a league of its own, the company's devices continue to receive rave reviews, market share similar to Windows OS which heavyweight Microsoft remains committed to (paid $7b for Nokia handset division).  How much longer can BlackBerry rely on the corporate market ?  by 2016 38% of companies are expected to stop providing mobile devices to staff.

Techstocks continue to shine !   Interbrand just released its annual ranking of the world's most valuable brands and technology companies took four out of the top five spots including, for the first time the top position:  #1 Apple ($98.3b +28%), #2 Google, #4 IBM and #5 Microsoft.  The next highest ranked tech company Samsung also moved up, to #8 from #9 last year.  Microsoft's recent acquisition Nokia was the worst performer, falling to #19 from #57.

Auto parts supplier Magna International is red hot!  

Though last quarter dividends per share didn't change from three months prior, sales (+16%) and earnings (+19%) were up by a healthy margin.  Not unsurprising given that, US auto sales rose at a torrid pace last summer (annualized rate for August was 16 million up 20% the strongest in six years).  Auto sales expected to slow to 1.15 million units this month (at GM only by a couple percentage points; GM is one of Magna's biggest customers); but a big reason for that is fewer selling days.  Ford also one of Magna's most important customers, reported a sales increase of 12% in August.  Last year, Ford awarded one of Magna's car plants in Brazil with a silver award for its 'superior quality, delivery and cost performance".

Since 2009 Magna has also been a key partner of Ford's electric vehicle division, it was in 2011 that Magna began assembling electric and hybrid vehicles for Ford (notable since this year 2013 Ford is on track to break its own sales record for hybrid vehicles of 35,500 reached in 2010).  Ford's August year-to-date auto sales totaled 221,270 +17.5%.

Barrick Gold Gets Leaner

With gold prices testing the $1300 level gold companies are being forced to adjust accordingly - gross production cost which includes expenses associated with exploration must be reduced so that companies can maintain healthy profits (investors have been shown to punish companies when earnings drop - they seem oblivious to the fact that a 20-30% drop in the gold price is going to make it next to impossible to avoid a quarterly earnings drop).  Barrick Gold has responded to this pressue by selling high cost operations;  Last summer it was the 3 Australian mines that comprise Yilgarn South (1h2013 196,000 ounces at a cash cost of $1145/oz), sold for a combined $300 million.  Then this month, the company announced its intention to sell two more mines for $100 million.  This would put Barrick Gold halfway through its ongoing plan to sell or lower output at 12 of its 27 mines.

Sobeys Leaps To The Top In Oil Rich Alberta, Acquires 213 Grocery Stores From Safeway (market share Loblaws)

        June 12th was a big day for Nova Scotia's biggest company Empire Company Limited (tsx:emp.a).  On that day, Safeway (nyse:swy) agreed to sell it 213 grocery stores for C$5.8 billion.  Sobeys last major move was a 1999 deal involving the Oshawa Group, that takeover only cost the company $1.5 billion but added more than $4 billion in annual sales and increased the number of locations by a factor of two.
The Safeway deal makes sense for Sobeys on a couple fronts. 
1) cost savings !  synergies of $200 million per annum averaged over the next three years.
2) Gives it grocery stores in sought after locations
3) Sobeys becomes a truly national grocery chain (large format supermarket locations go from 3 to 78 in British Columbia) 4) Gives it a leading market share position in Alberta which is significant for a couple reasons  i) Alberta's population growth is the highest among Canadian provinces ii) Alberta household income is some $15,000 higher than the national average meaning consumers could be more open to buying higher priced premium items (private label organic products have a higher profit margin).   July update - Sobeys parent company Empire Co exits the theater business by selling 44 theaters housing 349 screens for $255 million cash.  24 cinemas in Atlantic Canada (179 screens) will go to Cineplex for $200 million.  Landmark Cinemas is paying $55 million for the 20 Empire theatres in the rest of Canada (170 screens).  This is consistent with Empire Company's original plan to use $1 billion from asset sales to pay for Safeway (at fiscal 2013 year end the company had only $455m in cash).

The facts
- Sobeys pro forma annual revenue goes from $16 billion to $24 billion.
- 168 of the 223 Safeway stores (213 grocery, 10 liquor) are in British Columbia (75) and Alberta (93).  49 in Saskatchewan (33) and Manitoba (16).  Another 6 are in Ontario.
- Sobeys also gets 10 liquor stores (already has 29 lcbo stores most in Alberta) and 12 manufacturing facilities.  199 in store pharmacies, 62 fuel stations.
- Fuel business is growing !  189 gas stations in Quebec, 71 in Atlantic Canada and now 62 more in Western Canada.
- In the first half of 2013 $515.1m of the $780.5m in new revenue came from gas sales.  Boosting sales of gas is an effective way to increase revenue and cash flow. 
- As large a deal as it is, the Safeway acquisition doesn't give the company any additional market share in Quebec, and doesn't make much of a difference in Ontario (6 Safeway locations).  All of Ontario's grocery market share is held by Loblaws, Metro Inc, and Sobeys.  Sobeys needs organic growth there, acquisitions are not really an option.

A Next Move For Sobeys

 

 

Sobeys is in an enviable position.  Target (nyse:tgt) is allowing Sobeys to sell its own Compliments branded items at new Target stores across Canada.  Sobeys leads in grocery market share in Atlantic Canada, and discount chain FreshCo is having a lot of success competing with Loblaws and No Frills in Ontario.  Sobeys arguably runs a more diversified business than Loblaw Companies and that makes it a great investment.  Loblaws does have something Sobeys doesn't, a clothing business, but with pressure on apparel suppliers in Bangladesh to spend more refurbishing factories, increasing wages, profit margins may also be under pressure.

•  Lawtons can compete with Shoppers Drug Mart on a national scale. 

Grocery Stocks On The Move Carrefour Group CA, Sysco SYY, Sobeys

Food stocks Sysco syy, Carrefour Group and Empire Company Limited provide opportunity for investors at a time when there's not much to be enthusiastic about. 

In Canada a weaker dollar is akin to an interest rate cut discouraging spending in that country.
In the mining industry, weaker gold and silver prices cut into profit margins last year, leading to weaker results (eight of the world's tens largest gold companies reported a drop in earnings last year).

Weak jobs numbers in the United States affects the world's biggest consumer market, making companies involved in the clothing industry riskier investments, and now bank stocks could be hit as a result of ongoing uncertainty in Cyprus.  Confiscating people's bank accounts will undoubtedly cause many in Europe to keep their money out of banks since many of Europe's largest financial institutions are based in Italy and Spain, two countries that could follow Cyprus's example if the Troika's new bailout rules are instituted elsewhere.  Will banks like Banco Santander allow money from client account to be taken in order to pay down national debts ?

 But Grocery Stocks Are Different!

People don't have a choice when it comes to eating.  Stockpiling food isn't something most will be considering either since people are increasingly health concious which makes them reliable on perishable foods (since the alternative is food that's loaded with unhealthy preservatives). 

Grocery stocks have grown nicely over the last year despite the inability of many to hike prices in step with price inflation (Tesco for example reported +1.8% increase in same-store sales for the three months ended January 5, 2013 despite lower market share and lower sales of frozen food).  Also in the UK: grocery industry market growth +3.7% lags general inflation +4.3%.

This month, Empire Company Limited (emp.a) reported a drop in gross profit margin (24% to 23%) and a 32% decline in cash equivalents as well as 6% decline in net earnings but the stock remained in positive terroritory despite that (+12% last three months). The food division, Sobeys profited 8% more but that was because the food division includes gas stations (236 Shell gas stations purchased last year). Sobeys is the second largest grocery retailer in Canada but third largest in Canada's biggest market, Ontario.


Carrefour Group (euronext:ca) is another example of a solid growth stock.  In 2012 the food retailer profited 3.3 times more than the previous year (€1.233 billion) despite a sales increase of just 0.5% and a decline in ebit of -1.6%.  It turns out the company's assets are more valuable that people think !  CEO Georges Plassat has been been busy steering the company in a more profitable direction.  He thought that operating in 30 countries was too demanding and so Carrefour started selling off assets, starting with Greece.  Competition in the countries Carrefour has been exiting is high and that makes its businesses attractive to potential buyers.  Colombian operations were sold for $2.5 billion which represents 20 times enterprise value/ebitda, investors liked the return and the stock moved higher.  In 2012 Carrefour pulled out of five countries.  The money from the asset sales helped the company pay down net debt (€6.9 billion to €4.3 billion).  The next country Carrefour is contemplating leaving is Turkey and you be sure the return it will get for assets there will be at a premium.
Carrefour also has an insurance division that has exposure to South America (35% of 1b net banking income is from Argentina and Brazil).  Carrefour stock price +10.85% last three months, +32.31% last six months.

Up and Coming Natural Gas Companies Progress Energy (PRQ) Tourmaline Oil Corp (tse:TOU) Paramount Resources (POU) Intermediate

                  Over the last two years these rapidly growing companies (five billion dollar Tourmaline Oil Corp is only 4 years old !) weathered the steep decline in natural gas prices, which is quite impressive to say the least;  2012 first half revenues at Tourmaline (+32% --> $204 million), Paramount Resources (-6.2% --> $101 million) and Progress Energy (-12% --> $103 million) all stable despite the huge drop in natural gas price realized: Tourmaline -46.2% Paramount -43.2% Progress -33.5%.  What's more, these companies were able to attract the investment (Progress received $1.1 billion from Petronas) necessary to maintain capex spending (-3% Paramount, -22% Tourmaline) at a time when Canada's biggest player, Encana divested $2.2 billion in assets and lowered its 2011 investment plan by -37%. 

Yes, the federal government's ruling against the takeover of Progress Energy by Petronas complicates things for investors;  for many intermediate gas producers cash flow lags capital, making outside cash (investment) essential for asset development to continue, but I wouldn't be too concerned.  Cash flow will experience a natural rise over the coming quarters because natural gas prices are on the way up !  +73% in just the last six months. 

Amec plc Is A Solid Company Built On Growth (LON:AMEC, Mactec, Urenco, BP, Clean Energy, Energy Investments, Earth & Environmental)

Here's a stock that should appeal to the pernickety investor, London-based engineering group Amec (LON:AMEC). The company is an important player in both the nonrenewable (oil & gas) and renewable (nuclear & other clean energies) sectors; It provides services ranging from oil rig maintenance to water supply management of municipal acquifers and conservation strategies to nuclear power plant decommissioning and other safety services.

What makes the company solid is the fact that the services it provides are so diverse. It operates in oil and gas but also the booming clean energy industry. There's also the minerals & metals and environment & infrastructure divisions. The group provides consulting, engineering and construction/project management primarily as designer-developer of strategic assets (also maintenance and decomissioning, in 2010 $2.45b of its $5.0b sales originated from the engineering design process). In the North Sea, it fabricates and designs oil rig platforms. It also services oil wells in Kuwait and aids oil safety efforts in the Gulf of Mexico where it designs and delivers components for the Marine Well Containment Company (MWCC). In Chile AMEC has a contract with Compañía Minera del Pacífico (EPCM) for work at the Cerro Negro Norte iron ore project.
After the nuclear meltdown in Japan, nuclear safety is also becoming a major issue. That's good for Amec because the company is experienced at nuclear cleanup and decommissioning problematic reactors. Amec's customers are diverse meaning the company appeals to a broad group of clients. Key clients include the US Navy, nuclear company URENCO, and oil and gas companies British Petroleum and ConocoPhillips.

Important points to consider
- Amec added 3500 new employees in 2011 bringing the total to just over 27,000.
- Amec runs AMEC academy which helps new employees develop skills.
- Amec added a number of new customers in 2011 among them GDF Suez (Cygnus gas field) and nuclear power company Urenco.
- World primary energy demand is forecast to increase by 40% between 2009 and 2035 (12.15M tones of oil equivalent --> 16.950Mtoe).
- According to the world's biggest company ExxonMobil (2012 Global 2000 list released in April) global population will increase by 25% between 2010 and 2040 with non-OECD nations contributing 90% of energy demand growth.
- The Clean Energy market which is integral to Amec's business mix, was the recipient of $260 billion in global investment in 2011 which is a record high for that market.

Key Financial Metrics to consider

In 2011 earnings per share (EPS) up +13% to 70.5 pence, grew faster than revenue/turnover (+11%). Amec also pays dividends ! 30.5 pence/share in 2011 which is +15% vs 2010 (26.5 pence). While we're talking about dividends keep this in mind, AMEC's dividends have gone up for four consecutive years. Dividends were 13.4p in 2007, 15.4p in 2008, 17.7p in 2009 and 26.5p in 2010. The company's operating cash flow was up +22% in 2011 to £267 million. Total pretax profit is up nearly 50% in just two years even though during that time revenue increased by only 28.4%.

In my opinion AMEC's products and services are invaluable to the energy industry. Though about 80% of revenue comes from Europe and North America, AMEC has offices in 40 countries worldwide. The company is also not afraid of making big acquisitions; Amec has a major growth strategy which is refers to as Vision 2015. It aims to make the company more multinational through acquisitions while also enhancing its capabilities in key sectors. Consistent with that goal, in 2011 Amec acquired Australian oil and gas consultancy group Zektingroup for AUS$48 million (gives it a presence on the East Coast of Australia, Zekting's workforce = 200) followed by Georgia-based Mactec on May 17, 2011 for US$280 million all in cash. The deal for Mactec was ingenious, although Mactec is already involved in the same kind of business its client base was a lot different (was more commercial and industrial). In its last year of being independent Mactec made $411M in revenue (compared to $5.0B for Amec in 2010).

Mactec
The Mactec deal added 2,600 employees to Amec and boosted its North American workforce up to about 14,000 (half of company total, NA operations account for roughly half of Amec's revenue). Mactec then became part of AMEC's Earth & Environmental division (environmental, water resources, infrastructure unit). Mactec gives Amec more business in the Western USA and Canada.

Other Strong Investments in the engineering industry (nyse: MTZ)
MasTec, Inc ! If you live in North America you probably make use MasTec built infrastructure on a regular basis. The company installs and maintains energy infrastructure most notaby that which is used in electrical utility transmission. For the first three months of 2012 calendar year MacTec revenue is up +25.87% quarter on quarter to $778.48 million. However, the bottom line didn't improve (in the quarter net income down -33% to $14M) because the cost of revenue was up +29.5% ($583.91m --> $684.66m). That may be an aberration owing to wildly fluctuating metal prices and other imput costs; The cost of revenue in the March 2012 quarter was at its lowest level in three quarters.