RENEWED GROWTH DUE TO SOLID STRATEGIC EXECUTION. SIGNIFICANT IMPROVEMENT IN SECOND QUARTER RESULTS. GOOD REVENUE GROWTH (+3% AT CONSTANT EXCHANGE RATES) AND VERY SATISFACTORY COMMERCIAL SUCCESS. STRONG ADJUSTED OPERATING CASH FLOW GROWTH OF 9.9% (+13.9%2 FOR THE COMBINED WATER AND WASTE ACTIVITIES). ADJUSTED NET INCOME GROWTH OF 40% TO €187 MILLION. DALKIA TRANSACTION CLOSED JULY 25, 2014. 2014 OBJECTIVES CONFIRMED.
Antoine Frérot, Veolia Environnement’s Chairman and Chief Executive Officer indicated: “First half results were satisfying and encouraging. Revenue growth continues and our commercial efforts targeting the industrial sector are already bearing fruit. Our results improved significantly in the second quarter and the unfavorable first quarter weather impacts have already been absorbed. In the first half of 2014, the Company’s adjusted operating cash flow increased 9.9%2, while adjusted operating cash flow of the combined Water and Waste activities increased 13.9%2. As a result, our annual objective of around 10% growth in adjusted operating cash flow at constant exchange rates is confirmed.”
Revenue grew 1.4% (+3.0% at constant exchange rates) to €11,232 million compared to re-presented €11,074 million for the half-year ended June 30, 2013, with a strong rebound in the second quarter (+0.5% in Q1, +5.6% in Q2). Excluding Dalkia France, revenue increased 6.5% at constant exchange rates and +3.6% at constant consolidation scope and exchange rates.
In France, revenue was stable compared to the prior year period in both Water and Waste activities despite a difficult macroeconomic environment.
Europe excluding France revenue grew 2.4% at constant consolidation scope and exchange rates, given good momentum in Waste activities in the United Kingdom and Water activities in Central and Eastern Europe.
The Rest of the World segment recorded strong revenue growth (+8.0% at constant consolidation scope and exchange rates) due to good performance in Energy Services activities in the United States at the beginning of the year and an increase in landfill volumes in Waste in Australia. The segment also benefitted from the integration of Proactiva’s Water and Waste activities in Latin America, contributing to 22% growth at constant exchange rates.
Global Businesses revenue growth returned (+7.8% at constant consolidation scope and exchange rates), with progression in all activities (hazardous waste +6%, Sade +7% and engineering +10%).
Dalkia France revenue remained significantly down (-14.6% at constant consolidation scope in the first half of 2014, following -20.5% in Q1) as a result of the unfavorable weather impact related to an exceptionally mild winter, as well as the continuing end of gas cogeneration contracts.
By business, Water activities recorded 3.1% revenue growth at constant consolidation scope and exchange rates. Waste revenue increased 2.8% at constant consolidation scope and exchange rates, including the impact of higher volumes (+1.7%) and higher service prices (+0.8%). Energy Services revenue declined 10.1% at constant consolidation scope and exchange rates due to the negative impact of the mild winter.
Veolia continues to experience good commercial success.
During the first half of 2014 business development momentum was particularly good in the priority markets targeted by the Group, with in particular the extension of the Novartis industrial utilities contract (estimated cumulative revenue of €925 million), the construction and operation of two biomass plants in Canada (estimated cumulative revenue of €1.1 billion) and treatment of process water in the tight gas field project in the Sultanate of Oman (estimated cumulative revenue of $75 million). In total, strong value-added offerings for industrial clients represented 60% of contract wins in the first half of 2014.
Significant adjusted operating cash flow growth of 9.9% at constant exchange rates to €1,009 million, with 13.9% growth at constant exchange rates in the combined Water and Waste activities
Adjusted operating cash flow growth strongly accelerated in the second quarter, with 20.5% growth at constant exchange rates following 2.3% growth in the first quarter.
The variation in adjusted operating cash flow for the first half of 2014 includes headquarters restructuring charges of €22 million in the first half of 2014 compared to €32 million in the first half of 2013.
Adjusted operating cash flow growth benefitted from the impact of further cost savings, good performance in Waste activities in all geographies, as well as improved performance in Water activities in France. Adjusted operating cash flow in the first half of 2014 also benefited from the full consolidation of Proactiva in Latin America.
By segment, and at constant exchange rates: In France, adjusted operating cash flow increased 6.0%, mainly due to cost cutting. In the Europe, excluding France segment, adjusted operating cash flow grew 2.1% due to strong performance in the United Kingdom, and in Germany the benefit of restructuring implemented in the Waste business was offset by the decline in results in energy activities in the Braunschweig contract. The Rest of the World segment recorded 44.3% growth, driven by the United States, Australia and the benefit of the full consolidation of Proactiva in Latin America. The Global Businesses segment recorded slight adjusted operating cash flow growth of 1.7%.
By business, and at constant exchange rates: adjusted operating cash flow in Water activities increased 3.8%, and Waste activities grew 16.0%. Energy Services declined 4.4% due to the mild winter in France, while in the United States the winter was harsh and therefore favorable to operational performance. In particular, Dalkia France recorded a 14.8% decline in adjusted operating cash flow due to the unfavorable weather and the end of gas cogeneration contracts.
Adjusted operating income grew 4.3% (+5.8% at constant exchange rates) to €564 million compared to re-presented €541 million for the first half of 2013 despite the negative impact of weather on Dalkia International performance and the unfavorable variation of pension provisions of roughly €30 million.
Adjusted net income increased 40% to €187 million compared to re-presented €134 million in the first half of 2013.
The re-presented cost of net financial debt declined substantially from €264 million in the first half of 2013 to €222 million in the first half of 2014 due to a lower average net financial debt balance.
The adjusted tax rate was reduced to 35.3% in the first half of 2014 compared to re-presented 42.2% mainly due to improved results in France.
Net income attributable to shareholders of the company amounted to €151 million in the first half of 2014 compared to re-presented €1 million in prior year period.
Strong improvement in net free cash flow 1 generation to -€163 million for the first half of 2014 versus -€563 million 2 in the first half of 2013, an increase of €400 million.
Continuing capex discipline (€579 million in industrial investments in the first half of 2014 compared to €612 million in the first half of 2013) and good working capital management.
Net financial debt at June 30, 2014 amounted to €8,646 million versus €8,177 million at December 31, 2013.
2014 objectives confirmed:
Around 10% growth in adjusted operating cash flow at constant exchange rates
Significant growth in adjusted operating income
Reduction in financial expense
Significant growth in adjusted net income
Proposal of a dividend of €0.70 per share in relation to the 2014 fiscal year.
Veolia is the global leader in optimized resource management. With over 200,000 employees* worldwide, the company designs and provides water, waste and energy management solutions that contribute to the sustainable development of communities and industries. Through its three complementary business activities, Veolia helps to develop access to resources, preserve available resources, and to replenish them.
In 2013, Veolia supplied 94 million people with drinking water and 62 million people with wastewater service, produced 86 million megawatt hours of energy and converted 38 million metric tons of waste into new materials and energy. Veolia (Paris Euronext: VIE and NYSE: VE) recorded revenue of €22.3 billion* in 2013. www.veolia.com (*) Excluding Transdev employees and revenue currently under divestment
Veolia Environnement is a corporation listed on the NYSE and Euronext Paris. This press release contains “forward-looking statements” within the meaning of the provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including but not limited to: the risk of suffering reduced profits or losses as a result of intense competition, the risk that changes in energy prices and taxes may reduce Veolia Environnement’s profits, the risk that governmental authorities could terminate or modify some of Veolia Environnement’s contracts, the risk that acquisitions may not provide the benefits that Veolia Environnement hopes to achieve, the risks related to customary provisions of divesture transactions, the risk that Veolia Environnement’s compliance with environmental laws may become more costly in the future, the risk that currency exchange rate fluctuations may negatively affect Veolia Environnement’s financial results and the price of its shares, the risk that Veolia Environnement may incur environmental liability in connection with its past, present and future operations, as well as the risks described in the documents Veolia Environnement has filed with the U.S. Securities and Exchange Commission. Veolia Environnement does not undertake, nor does it have, any obligation to provide updates or to revise any forward-looking statements. Investors and security holders may obtain a free copy of documents filed by Veolia Environnement with the U.S. Securities and Exchange Commission from Veolia Environnement.
This document contains "non-GAAP financial measures" within the meaning of Regulation G adopted by the U.S. Securities and Exchange Commission under the U.S. Sarbanes-Oxley Act of 2002. These "non-GAAP financial measures" are being communicated and made public in accordance with the exemption provided by Rule 100(c) of Regulation G
1 Unaudited figures 2 At contant exchange rates. At current exchange rates adjusted operating cash flow growth was 8.5% and 12.3% for the combined Water and Waste activities. 3 Cash flow before net financial divestments and after payment of financial expense and taxes represents the sum of adjusted operating cash flow and operating cash flow from financing activities, dividends received from joint ventures, principal payments on operating financial assets, changes in working capital for operations and industrial investments and industrial divestitures, excluding net industrial investments of discontinued operations.
4 Excluding the hybrid issuance in euros and pound sterling for €1,454 million (including coupons paid) in January 2013.