Suez Environnement Takes Additional Measures to Protect Profits

Suez Environnement, Europe’s second- biggest water company, is cutting costs and investment after its waste-handling business was hurt by the slowing economy.

“We have decided to take additional measures in order to protect our profits in the best way we can,” Chief Executive Officer Jean-Louis Chaussade said today in an interview on Bloomberg Television. These include “slowly” reducing investment and additional cost-cutting steps, he said.

Chaussade joined other executives from some of France’s biggest companies, gathered for an annual conference organized by the employers’ group Medef outside Paris, in calling for policies to spur growth. Suez Environnment, which is 36 percent owned by GDF Suez (GSZ) SA, reported an 82 percent slump in first-half profit as the volume of waste handled dropped in response to lower factory output.

“There is a direct relation between waste volumes and industrial activity,” the CEO said. “We need to get back industrial growth.”

Suez Environnement said earlier this month it would raise a cost-savings target by 40 million euros ($50 million) this year to 150 million euros and reduce net investment by 100 million euros. Some smaller assets may be sold, the company said.

Visibility is “very difficult” for the next year given slowing economic growth in Europe, the U.S. and China, Chaussade said in today’s interview.

No Difficulties

The utility’s biggest market after France is Spain, which is considering a second European bailout amid a recession and an unemployment rate of about 25 percent.

Even so, Suez Environnement hasn’t faced any difficulties in getting Spaniards to pay their water bills.

“We do not see for the time being any difficulties with payments,” Chaussade said. “Spain is reacting to its difficulties by asking private companies to take care of more networks and users. There are opportunities.”

Spanish water prices are “well below” the European average while investment is needed in infrastructure, according to the French utility, which controls Spain’s largest non-state water supplier Sociedad General de Aguas de Barcelona SA, or Agbar.

To help low-income households, Suez Environnement has reduced rates, according to Chaussade.

The French government will unveil a proposed law as early as next week for so-called social tariffs for water, power and natural gas, Environment and Energy Minister Delphine Batho said yesterday. Under the plan, rates would rise depending on volumes consumed.

“We are promoters of social tariffs,” Chaussade said in the interview. “We are convinced that it is a solution that is needed in France. But if there are lower rates for the first cubic meters of water for the most vulnerable people then you have to get this back on other clients.”

The shares fell 3.1 percent to 8.778 euros as of the close of trading in Paris. The stock is down 24 percent in the past 12 months.

To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net; Francine Lacqua in London at flacqua@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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