Veolia Jumps as Waste-Unit Slump Eases, Bolstering Profit

Veolia Environnement SA, Europe’s biggest water company, rose the most in 11 weeks in Paris trading after profit jumped.

Veolia climbed as much as 8 percent, the biggest gain since Aug. 21, and was up 6.1 percent at 12.94 euros as of 10:26 a.m. local time. Trading volumes already exceeded the three-month daily average.

The utility is reaping the benefits of restructuring its operations to reduce its global reach, curb debt and raise profitability. The shares have rallied this year after tumbling 58 percent over the previous two years as industrial production slumped in Europe, eroding demand for waste handling.

Adjusted operating income rose 20 percent at constant exchange rates to 620.8 million euros ($840 million) in the first nine months of 2013 from a year earlier, Veolia said today in a statement. The utility kept its financial targets and said Philippe Capron will be the new chief financial officer.

The results “highlight the company’s capacity to manage its restructuring process despite an unfavorable macro trend,” Natixis, which recommends buying the shares, said in a note. The company’s businesses “are improving gradually, also fueled by the cost-reduction plan.”

Net financial debt fell to 9.6 billion euros at the end of September from 10 billion euros at the end of June, and will be 8 billion euros to 9 billion euros by the end of 2013, according to Veolia. The utility sold 431 million euros of assets in the nine-month period and cut 109 million euros of costs.

Waste Management

Smaller competitor Suez Environnement has also suffered a decline in waste handling amid economic weakness in Europe. The Paris-based utilities compete to provide municipal and industrial waste and water services. They also manage large treatment installations such as desalination plants.

Veolia’s waste volumes shrank 0.7 percent in the nine months, compared with a 1.1 percent decline in the first half, the company said today. Growth came from the Asia Pacific region, the U.K. and the U.S., while Germany remained “strongly down,” Chief Executive Officer Antoine Frerot said on a call.

“We maintain our cautious stand in the short term,” Bryan, Garnier & Co. said in a note. Estimates for full-year earnings before interest, tax, depreciation and amortization are “extremely optimistic,” even with the cost-cutting measures.

Veolia plans to increase reliance on industrial contracts and focus on “high-growth” economies such as China. Since the start of the year it has unveiled plans to expand in nuclear dismantling, hazardous-waste clean-up and shale-drilling water treatment.

“Veolia is pursuing its trajectory toward profitable growth,” Frerot said today. The company will pay a dividend of 70 cents a share.

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