Sept. 18 (Bloomberg) -- Veolia Environnement SA, Europe’s biggest water company, may offer a cash-only option for its 2013 dividend, according to a report by Bryan, Garnier & Co.
Chief Executive Officer Antoine Frerot “will push the board to remove the scrip option,” analyst Julien Desmaretz, who has a ‘buy’ rating on the shares, wrote after meeting with the Paris-based utility’s managers.
“Making the dividend fully paid in cash will not only prevent any further severe dilution for shareholders but also send a key positive signal to investors that the group is on-track to at least reach initial targets,” the analyst said.
Veolia is more than 18 months into a plan to lower debt and boost profit by selling assets, shrinking its geographic footprint and increasing industrial water and waste contracts. First-half profit was almost wiped out by impairments on waste services in Germany, the company said last month.
Veolia, whose shares have risen 44 percent this year, cut its dividend to 70 euro cents a share for 2011, 2012 and 2013 from a previous 1.21 euros. The 2011 and 2012 payouts were in cash or shares.
“There is room for dividend increase in the mid-term” as of 2015, according to the Bryan, Garnier report. “The CEO suggested he would ask for the removal of the dilutive scrip option.” Veolia spokeswoman Sandrine Guendoul declined to comment.
An update of Veolia’s operations showed the 750-million euro ($1 billion) cost-cutting plan is “on track” and trends in waste treatment improving for volume and pricing, the report said.
Veolia has a goal to sell 6 billion euros of assets by this year and intends to lower costs and increase industrial contracts with a focus on “high-growth” economies such as China that counters weakening demand in Europe.
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