Suez Environnement Climbs Most Since 2012 After Beats Estimates

Suez Environnement (SEV) advanced the most since 2012 in Paris as the second-biggest European water company beat analyst estimates by posting a 40 percent jump in profit.

Net income rose to 352 million euros ($482 million) in 2013 from 251 million euros last year when the utility took a charge on an Australian desalination plant. It beat the 342.1 million-euro average of nine analyst estimates compiled by Bloomberg, even as the waste-handling business has suffered lower volumes.

The stock rose as much as 7.7 percent, the most since Dec. 11, 2012, and was up 6.9 percent at 14.085 euros by 11 a.m. The Paris-based utility will propose an annual dividend of 65 euro cents a share and pledged at least the same for 2014.

Chief Executive Officer Jean-Louis Chaussade said the drop in European industrial production, which has hampered utilities that process waste, reached a nadir last year. Factory output in the region this year may be weak to moderate, he said.

“Everywhere in Europe except maybe the Netherlands we have the feeling we may have hit bottom,” Chaussade said today on a conference call. “Industrial production may have halted its decline. The decline slowed considerably in the second half. We feel that in 2014 the decline will have stopped.”

The waste results show a “slight improvement in the fourth quarter,” Emmanuel Retif, an analyst at Raymond James, wrote in a research note. Net debt was also “below consensus,” he said.

Suez reported net debt totaled 7.245 billion euros at the end of the year, compared with 7.436 billion euros in 2012.

Waste Volumes

Suez and Veolia Environnement SA (VIE) have seen waste-treatment volumes decline as economic weakness in Europe hurts factory output. Suez’s earnings before interest, taxes, depreciation and amortization for European waste declined 4.5 percent due to the difficult economic environment, the company said in a statement.

European waste volumes processed fell 3.2 percent in 2013, with improvement in the U.K. and Nordic countries and a decline in Germany and eastern Europe, the utility said today. Volumes of water sold fell in Europe and prices during French contract renewals were stable following an 8 percent decline in 2012.

Suez and Veolia compete in France for municipal waste and water services and globally for large treatment installations like desalination plants. Suez is seeking to expand in faster-growing places like China, India and North Africa and move into providing services for world-spanning industrial companies.

“Our markets are changing,” Chaussade told analysts on a call. “We aren’t everywhere but where we are we are strong or will become so quickly.”

The company set a goal for organic growth for Ebitda this year of at least 2 percent, debt-to-Ebitda of about 3 times and free cash flow of about 1 billion euros. Ebitda in 2013 was 2.52 billion euros, lower than the target of 2.55 billion euros.

Suez reduced its costs by 180 million euros last year and is seeking to cut another 125 million euros this year.

Chaussade said the company may carry out acquisitions this year to strengthen its position in markets, citing the increased stake in Italian utility Acea SpA that Suez announced yesterday.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

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

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