With the objective of further strengthening its operations in the emerging markets, Thermo Fisher Scientific (TMO) has opened a new demonstration laboratory and training center in Seoul, South Korea. The 1,800-square-foot facility will showcase the company’s portfolio of analytical instrumentation, software and consumables.
The strategy of heightening its focus on the emerging markets is yielding results for Thermo Fisher. This is crucial as growth in the matured/developed market is flat if not declining. Maintaining its current trend, emerging markets generated strong double-digit growth in the last reported quarter with both China and India growing over 20%. The high-growth Asia-Pacific markets now account for 15% of total company revenues, up from 13% in 2010. With the new facility in Seoul, Thermo Fisher has established its direct presence there, which in turn should yield higher revenues from this region.
As a part of Thermo Fisher’s plans to focus on the Asia-Pacific, it has decided to build a new factory in Suzhou, China thus bolstering the R&D infrastructure there. This will provide the company the required capacity to produce laboratory consumables for growing local life sciences markets. The company had moved the headquarters of its environmental business to Shanghai a few years back.
Thermo Fisher views strong potential in China based on rapid industrialization, increasing focus on healthcare, new BioPharma R&D centers and government-sponsored research opportunities. On the other hand, key growth drivers in India include outsourcing of clinical packaging and logistics by Pharma and Biotech companies, growing Biotech industry, growing food and beverage industry and introduction of environmental regulations to address air quality issues in the wake of rapid industrialization. The company is also experiencing significant growth in Brazil.
The expansion into emerging markets was in the wake of lackluster demand seen in home territory and the mature markets of Europe. Academic and/or government customers have been increasingly under pressure to curtail their budgets. Besides Thermo Fisher, its peers Life Technologies (LIFE) and Qiagen (QGEN) faced similar headwinds.
In difficult times, the company to its credit undertook operational efficiency and cost control initiatives that helped boost its operating margins. The company was also able to leverage its strong cash flow to make strategic acquisitions that widened its suite of products.
We have a ‘Neutral’ recommendation on Thermo Fisher. The stock retains a Zacks #3 Rank (Hold) in the short term.Read the Full Research Report on LIFE
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