Suez Environnement Points to Improved Waste as Profit Drops

Suez Environnement highlighted improved waste-treatment operations as a sign manufacturing in Europe is recovering even as the region’s second-biggest water company by market value posted a surprise drop in profit.

First-quarter earnings before interest, tax, depreciation and amortization fell to 552 million euros ($763 million) from 564 million euros a year before mostly on currency effects, the utility said today in a statement. That missed the 568 million euro average of six analyst estimates compiled by Bloomberg.

“The slight improvement in the waste business seen at the end of last year has continued,” Chief Executive Officer Jean-Louis Chaussade said in the statement. Treated volumes rose 1.7 percent as the European economy “seems to be stabilizing.”

That’s more than the 1 percent figure in the company’s financial targets, which were maintained for the full year.

Earnings were below expectations, Raymond James analysts including Emmanuel Retif said today in a note. Still, an increase in waste handled is a “positive driver.”

Suez fell 1.2 percent to 14.47 euros by 9:50 a.m. in Paris.

The company and larger rival Veolia Environnement SA (VIE) have suffered in recent years from falling demand for industrial-waste collection as factories in Europe reduced output amid the region’s economic crisis. In February, Suez Environnement, 34 percent-owned by energy producer GDF Suez (GSZ) SA, said the market “may have hit bottom” last year.

Municipal Waste

“The good news is that it’s the first time in two years that waste volumes have risen,” Chief Financial Officer Jean-Marc Boursier said on a conference call, attributing the gain to improvements in economies and new installations.

The company has set a target for Ebitda growth from current assets 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, below a goal of 2.55 billion euros.

Suez Environnement (SEV) has a “wish list” of possible targets for acquisitions and the company has the financial flexibility to carry them out, Boursier said in an interview in February.

With a drop in net financial debt to 7 billion euros at the end of the quarter, from 7.6 billion euros at the end of 2013, that flexibility totals about 700 million euros, he said today.

Suez Environnement would prefer businesses outside Europe, new types of water services instead of concessions and industrial rather than municipal activities, Boursier said. The utility is also more interested in waste “valorization,” or making value from garbage, than traditional methods of disposal.

Suez and Veolia compete in France for municipal waste and water services and worldwide 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.

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

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Tony Barrett, Ana Monteiro

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