Suez Environnement Earnings Drop on Economy, Impairment

Suez Environnement, Europe’s second-biggest water company, reported a 22 percent drop in profit against a “challenging economic” backdrop and after taking a charge on an Australian desalination plant.

The shares slid as much as 6.3 percent, the most in seven months, after the Paris-based company said today that net income fell to 251 million euros ($336 million) in 2012 from 323 million euros a year earlier. That missed the 265.8 million-euro mean estimate of 10 analysts surveyed by Bloomberg.

Suez Environnement, 34 percent-owned by GDF Suez SA, previously warned that an impairment on its Melbourne desalination plant, combined with an economic slowdown, would hurt earnings. Suez took 83 million euros of provisions for the plant in the first half and has recovered 20 million euros since. It took 262 million euros in provisions for the plant a year earlier, according to an earnings presentation.

The water utility, together with Veolia Environnement SA, has seen demand for industrial waste collection slump after manufacturers reduced factory output. Suez reported a 9.5 percent drop in the amount of waste “eliminated” at its European division last year while overall volumes treated fell 2.5 percent due to the slowdown, according to today’s statement.

Suez said it will propose a full-year dividend of 65 euro cents a share and pledged that the payout for 2013 would be equal to or higher than that.

Financial targets for 2013 were set for earnings before interest, taxes, depreciation and amortization of at least 2.55 billion euros, and a debt-to-Ebitda ratio of about three, according to the company. 2012 Ebitda was 2.45 billion euros.

The shares were down 3.8 percent to 9.467 euros as of 1 p.m. local time, the most intraday since Sept. 26. They’re almost unchanged over the past year.

Veolia Chief Executive Officer Antoine Frerot said in January that talks with Suez last year on a plan for a tie-up between the two water utilities failed because of insurmountable hurdles on the French market.

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