Veolia Slumps on Concerns Profit Will Fall, Cost Cuts

Veolia Environnement SA, Europe’s largest water company, fell to a three-month low in Paris trading on concerns that profit will decline and cost cuts may backfire.

Veolia slid for a third day, slumping 3.5 percent to 11.405 euros after Goldman Sachs Group Inc. lowered its outlook for Veolia’s earnings and said there’s a “risk that pricing pressure erodes the potential benefits” of cost savings.

Chief Executive Officer Antoine Frerot is almost two years into a turnaround plan designed to reduce the Paris-based utility’s global reach, curb debt and raise profitability. The shares have rallied 25 percent this year after tumbling by more than half the previous two years as industrial production slumped in Europe, eroding demand for waste handling.

Goldman, with a neutral rating on the shares, lowered its earnings per share outlook for Veolia for this year and next by 15 percent to 19 percent “mainly on the back of lower water and waste contribution,” the bank said. Forecasts for the same measure for 2015 to 2017 were lowered by as much as 6 percent.

Veolia reported Nov. 7 that net financial debt fell to 9.6 billion euros ($13 billion) 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.

The utility said waste volume shrank 0.7 percent in first the nine months of the year compared with a 1.1 percent decline in the first half. Growth came from the Asia-Pacific region, the U.K. and U.S. while Germany remained “strongly down,” Frerot said last month.

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