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Veolia Loss Bigger Than Expected on Frerot’s Restructuring

Veolia Environnement CEO Antoine Frerot
Veolia Environnement SA Chief Executive Officer Antoine Frerot speaks during the company's results news conference in Paris. Photographer: Fabrice Dimier/Bloomberg

Veolia Environnement SA, the French waste and water utility trying to reduce debt, reported a larger-than-estimated 2011 loss on restructuring costs and a business slowdown in southern Europe and north Africa.

The net loss was 490 million euros ($653 million) compared with a restated profit of 559 million euros a year earlier, the Paris-based company said today in a statement. That was greater than the average estimate of a 281 million-euro loss of seven analysts surveyed by Bloomberg.

This year “will be the first for the transformation of Veolia after a year of transition,” Chief Executive Officer Antoine Frerot said on a conference call. He declined to provide an outlook for earnings for 2012 or comment on his future as chief executive at the water provider.

Frerot is seeking to revive the utility amid reports that his predecessor Henri Proglio, who remains a director, was trying to garner board support for a replacement. Frerot’s revamp would undo a legacy of expansion under Proglio that took the utility to 77 countries from Argentina to South Korea. Veolia has lost about half its market value since mid-July.

Veolia rose as much as 6.2 percent, its biggest intraday gain in five months. It traded 5 percent higher at 9.65 euros as of 9:41 a.m. in Paris and was the biggest gainer on the benchmark CAC 40 index, followed by Safran SA, up 1.1 percent.

Operating income fell to 1.02 billion euros from 1.98 billion euros a year earlier. Sales advanced 3.1 percent to 29.6 billion euros. The company said it will target annual revenue growth of more than 3 percent from 2014 and average annual adjusted operating cash flow growth of more than 5 percent.

A total for restructuring costs wasn´t immediately available.

Divestments Target

Yesterday, Veolia said in a statement the board of directors “reaffirms the relevance of the strategic plan adopted in December 2011 and renews its confidence in the CEO.”

The utility achieved 1.54 billion euros of divestments last year, taking the total to 4.08 billion euros during the past three years, according to the statement. This was “significantly” more than a target of 3 billion euros between 2009 and 2011, it said.

Veolia is in exclusive talks with an unidentified investor for the sale of Transdev, the mass-transit unit it owns with the Caisse des Depots et Consignations, Frerot said today. The sale could be complete by the summer, according to Chief Financial Officer Pierre-Francois Riolacci.

Veolia has also initiated the process of selling solid waste activities in the U.S. and U.K. regulated water businesses, according to the statement.

Veolia will narrow its geographic reach to about 40 countries in a bid to lower debt to less than 12 billion euros by the end of 2013, the company said. Net financial debt was 14.73 billion euros at Dec. 31, down from 15.22 billion euros a year earlier.

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