Veolia Environnement SA will beat annual financial and cost-cutting targets after first-half profit almost tripled amid gains in waste treatment and new industrial contracts, the utility’s chief executive officer said.
“We will certainly beat our objectives but it is too early to say by how much,” Antoine Frerot said in an interview with Bloomberg TV. While it’s too early to set new targets, he said profit and cash-flow are already ahead of full-year goals and cost-cutting is ahead of schedule.
Net income was 352.7 million euros ($387 million), compared with 131.1 million euros a year earlier, the Paris-based company said Monday in a statement. Earnings before interest, taxes, depreciation and amortization rose 11 percent to 1.531 billion euros, compared with a restated pro forma 1.384 billion euros. Veolia kept 2015 financial targets and said it would present a three-year strategic plan on Dec. 14.
The utility expects to grow in the coming years after returning to profitability in 2014 following efforts to trim debt, sell assets and cut costs amid an economic slump. Frerot has taken Veolia into new markets such as water-treatment works for the mining, oil and gas, and food industries.
Its shares were 1.7 percent lower at 19.95 euros at 3:14 p.m. local time. The stock has climbed 35 percent since the start of the year.
Veolia earnings were “solid,” Xavier Caroen, an analyst at Bryan Garnier & Co., wrote in a note. He recommends buying the shares. Investors would have been more enthusiastic if the utility had revised its guidance, he said.
Veolia’s “financial indicators have increased, leading to a significant increase in margins,” Veolia’s Frerot said. “We are very comfortable with our annual guidance.”
Cost-savings helped offset the impact on Ebitda of lower recycled raw-materials prices and renegotiated French water contracts, according to the statement. The volume of waste that Veolia handled in the first half rose 0.8 percent. Industrial contracts, including one signed in April for water treatment at a South Korean nuclear plant, make up a growing share of its business, Frerot said.
Veolia is seeking to increase revenue, Ebitda and current operational income this year. It wants dividend and hybrid coupon payments to be covered by current net income and paid by free cash flow excluding net financial divestments. The company’s targets translate to more than 500 million euros in current net income and the same for free cash flow, Frerot said.
It cut costs by 110 million euros in the first half as part of a four-year program to reduce expenses by 750 million euros through 2015, according to the statement. The savings have brought the total to nearly 700 million euros during the period, he said.
Veolia plans to continue cost-savings beyond this year, Frerot said.
Net financial debt stood at 9.223 billion euros at the end of June, compared with 8.936 billion euros at the same time last year. The utility attributed the increase to currency fluctuations.
Suez Environnement, Veolia’s main European rival, on July 29 reported a 45 percent drop in first-half profit from a year earlier when it benefited from an asset sale. Suez said the European waste business has remained lackluster.