Suez Profit Rises as Expansion Tempers Slow Waste Treatment

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Suez Environnement Co. said first-quarter profit rose 16 percent as Europe’s second-largest water company’s international expansion countered its sluggish French waste-treatment business and weak prices for scrap metal and paper.

The European recycling and recovery division “remained penalized by the weakness of industrial business volumes, especially in France, and by the continued decline in the price of the main recycled materials,” Chief Executive Officer Jean-Louis Chaussade said in a statement Friday. The utility confirmed 2015 financial targets.

European economic indicators including industrial production don’t suggest a change in the region for the rest of the year, Christophe Cros, senior executive vice president in charge of finance, said on a conference call. The utility’s waste unit depends on factory output.

The company has expanded to Spain and Italy as well as Africa and the Middle East to try to boost profitability amid pricing pressures, French municipal-contract renewals and a slow European industrial waste business. Chaussade has said the utility has “financial flexibility” to enable expansion through “opportunistic” acquisitions, a strategy Cros confirmed Friday.

A goal of profitable growth in the coming years includes acquisitions, Cros said today. The utility is looking at possibilities including in European waste, he added.

The shares rose 2 percent to 18.17 euros at 9:45 a.m. in Paris.

Earnings Increase

First-quarter earnings before interest and tax rose to 266 million euros ($287 million) from 229 million euros a year earlier, the utility based outside Paris said Friday in a statement. Earnings before interest, tax, depreciation and amortization climbed 8 percent to 597 million euros.

Net financial debt advanced to 7.7 billion euros from 7.2 billion euros at the end of 2014, mostly due to currency fluctuations, it said. The company “remains comfortable” with the level, Suez said.

Sales in the recycling and waste business in Europe fell 0.9 percent as drops in prices of recycled metals and paper products outpaced by a slight increase in treated volumes, the company said. A decline in sales in the division in France was a sharper 4 percent compared with other parts of Europe.

Waste Volumes

French waste volumes were helped by a push into recycling and waste-to-energy, although this was offset by lower amounts going to landfill, Cros said. “Pricing pressure” remains for recycled materials, electricity and landfill, it said.

The group has set a target of 3 billion euros of Ebitda in 2017. For this year, it expects “positive” organic Ebitda growth, at least 4 percent organic EBIT growth and at least 3 percent growth in like-for-like revenue.

“At the end of the first quarter we were in line in terms of our targets for lowering costs,” Cros said on a separate conference call for reporters.

The utility wants to further lower costs by about 400 million euros over the next three years including at least 150 million euros this year. It plans to generate about 1 billion euros of free cash flow in 2015.

The company and larger rival Veolia Environnement SA compete in France for municipal waste and water services and globally for large treatment installations including desalination plants and recycling factories.

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