AsureQuality mum on reported talks to buy out DTS partners

AsureQuality, the state-owned food safety and biosecurity services firm, is staying mum on reports it's in talks to buy out its partners in Australia's Dairy Technical Services.

The Australian Financial Review's 'StreetTalk' column, citing unnamed sources, reported Melbourne-based DTS is in talks with 25 percent shareholder AsureQuality over a potential buyout, valuing the food and beverage testing business at between A$80 million and A$100 million. DTS's other shareholders include Fonterra Cooperative Group, Murray Goulburn Cooperative, and Warrnambool Cheese and Butter Factory.

A spokeswoman for AsureQuality said the state-owned enterprise was "bound by confidentiality" and has no comment to make.

In September, AsureQuality reported a 9 percent decline in profit to $11.4 million for the year ended June 30, and said it expects a further decline in 2016 as it ramps up investment for future expansion outside its core markets of Australia and New Zealand and into southeast Asia, China, and the Gulf states. It valued its DTS stake at $10.4 million as at June 30.

DTS, which trades as DTS Food Laboratories, operates the biggest food microbiology and chemistry labs in southeast Asia with a staff of about 400, according to its website.

The Australian company reported a profit of A$4.1 million on revenue of A$50.1 million in the 12 months ended April 30, up from earnings of A$3.6 million on sales of A$45.6 million a year earlier, according to financial statements lodged with the Australian Securities & Investments Commission in August. The report said revenue and profits "very significantly exceeded targets" with "significant premiums" from emergency testing.

"The increasing competitor activity and the consequent pressures on clients to reduce their costs continue to impact on the company's markets and prospects," the DTS report said. "Revenue and profit expectations remain low in the short-term, improving after the investments of the next two years in sales and marketing and in innovations efforts."

DTS said its budget for the 2016 financial year reflected "tougher conditions and greater investment in business development has been adopted" with the benefits seen in the company's forecasts to 2020. It expected the market to grow at a 2 percent annual pace over the forecast period, it said.

(BusinessDesk)