Demand from Asia pushes 3i earnings up

PRIVATE equity firm 3i Group said a manufacturing recovery, driven by demand from Asia and South America, pushed earnings higher at its portfolio companies as it reported half-year earnings yesterday.

The group said aggregate earnings across its buyouts portfolio grew by eight per cent between March and September, while its growth capital portfolio saw a seven per cent rise. Both were driven by a recovery in the industrials sector.

The value of its portfolio increased to 330p a share from 321p at the end of March.

“We have some great manufacturing and industrial businesses that have seen significant turnover growth – 30, 40, 50 per cent in a year based on growing demand from India, China and South America,” said 3i’s chief executive Michael Queen.

As other private equity firms have done, 3i has spent much of the last two years protecting its companies from the downturn. It said it was now making good progress in increasing investment.

3i, which recently reshaped its deal teams to hunt for deals by region, increased investments in the first half to £327m from £190m a year ago.

The group added French healthcare provider Vedici and calibration and measurement testing group Trescal.

Queen said the pipeline of potential new acquisitions has improved progressively and hopes 3i will spend more on deals than it reaps from company sales in the second half. It recently agreed to sell German engine maker MWM to Caterpillar.

“We are converting that pipeline into completed transactions and that’s what I hope you’ll see further over the next six months,” Queen said.