This month, Steve McCann, the CEO of Lend Lease (ASX: LLC), commented in his AGM speech that the company wanted to expand its overseas business to take advantage of growing opportunities outside of Australia, but also to diversify its geographic presence.
Currently, revenue from Australia was 63%, whereas the Americas only made up 22%, and Asia and Europe were about 5% and 9% respectively.
There is more competition, different legal and business structures that can cause problems, and international expansion can be costly. However, larger corporations need huge scale to continue growth.
Investors should know what Australian companies operate overseas, how successful they are, and what investment opportunities they offer.
Medical device and biotechnology developer Sirtex Medical (ASX: SRX) has 71% of its revenue from the Americas and 22% from Europe. Asia Pacific comes in at 6%. It specialty is in the manufacture and distribution of liver cancer treatments using small particle technology to fight cancer at the source. In 2013, net profit margin was at 18.8% and earnings have had relatively steady growth since 2009.
Ainsworth Game Technology (ASX: AGI) and Aristocrat Leisure (ASX: ALL) both have a significant proportions of overseas business since they manufacture gaming machines like pokies and other electronic gambling equipment for major casinos and resort areas in many countries.
Both have high returns on equity, and with online gaming and gambling increasing, they have opportunities to develop digital and mobile gaming platforms that potentially offer high profit margins.
Integrated grain business Graincorp (ASX: GNC) is a leading agricultural products grower and supplier that only has 43% of its revenue from Australasia, with Asia, Europe and North America in proportions of 11%- 18%.
High quality grain from a stable source is attractive to overseas buyers. So much so that the company is under a takeover offer from US company Archer Daniels Midland (NYSE: ADM) currently, and is under government review for approval.
Foolish takeaway
Companies benefit from geographical diversification because just as there's always a boom going on somewhere in the world, there are also busts. A growing company can't be held up by regional difficulties, so it needs to take the next step up to assure prosperity.
Check where a company's business is coming from and the amount of profits from each region to see how well it diversifies its earnings.
