Lab tester ALS eyes long-term COVID-19 test demand to drive growth

ALS chief Raj Naran says the laboratory testing company is seeking to tap into a new normal where businesses complete regular safety reviews and surface testing to rule out the presence of COVID-19 and other viruses on their premises.

Seeing it as a "long-term opportunity", ALS has stepped up work on surface testing products, which Mr Naran said would be in high-demand in coming months as economies gradually re-open from their lockdowns in the pandemic.

"We are seeing hotels do it now, large office buildings. I think it's a new normal for people to come back to work and feel safe," Mr Naran said. The company has also repurposed some operations to roll out human test kits for the virus in Europe.

ALS's shares traded 4.7 per cent higher at $7.38 as of 1:50pm in Sydney.

The boss of the $3.4 billion company said the global economy would take a long time to recover from the coronavirus, particularly in some of its key markets such as Mexico, Peru and Brazil.

And many regions would experience second waves of the virus outbreak, he predicted.

"The reality is that nothing has changed. There is no known cure or vaccine," Mr Naran said.

ALS has more than 10,000 staff in 65 countries and performs compliance testing for sectors including pharmaceuticals, life sciences, food products and oil and gas.

Mr Naran made his comments after the company reported its 2020 net profit dropped by $24.8 million to $127.8 million, due to impairments against its Latin American life sciences division and its industrials segment.

Revenue jumped 10 per cent to $1.8 billion, while its underlying profit rose 4.3 per cent to $188.8 million, meeting company forecasts. Its life sciences testing business, including the recently purchased Mexican pharmaceutical testing business ARJ, drove earnings growth as it turned over $939.2 million for the year, up 13 per cent.

"The reality is that nothing has changed. There is no known cure or vaccine."ALS chief Raj Naran

ALS said the $50 million writedown on the value of its Latin American operations reflected the "enhanced risk profile of the market, particularly Brazil and Peru, due to ongoing socioeconomic issues, likely prolonged impact from COVID-19 and material devaluation of currencies". On top of that, the company also wrote down $40 million on the value of its industrial services unit, citing the recent turmoil in the oil and gas sector and the coronavirus downturn.

ALS has stood down 15 per cent of its employees this month to reduce costs in the wake of the pandemic, and extended its debt facilities by $200 million to navigate the coronavirus crisis.

Investors will receive a final dividend of 6.1 cents a share, down from 11.5 cents in the same period last year.