Veolia Beats Goals for Cost Cuts Under CEO’s Transformation PlanTara Patel
Veolia Environnement SA, the largest European water company, beat its targets for cost-cutting last year under Chief Executive Officer Antoine Frerot’s mission to transform the business by offloading assets and curbing debt.
“After two years we are ahead of our marching plan” on cost cuts, Frerot told reporters today in Paris. “The results for 2013 will be surpassed compared to what we announced. The targets for cost-cutting are confirmed for 2014 and 2015.”
The utility in November said it had cut 109 million euros ($147 million) of costs in the first nine months after setting a goal of reducing them by 170 million euros for the year.
Frerot had promised a “profound transformation” of the utility after former CEO Henri Proglio extended Veolia’s reach to 77 nations with an acquisition spree. The new chief changed top management, shuffled the board and sold billions of euros in assets as part of a plan to save 750 million euros by 2015 and after the utility was hurt by Europe’s slowing economy.
The company expects to post net financial debt of 8 billion euros to 9 billion euros as of the end of 2013, and asset sales in 2012 and last year reached 6.3 billion euros. On Nov. 7 it reported a debt figure of 9.6 billion euros as of the end of September, down from 10 billion euros at the end of June and 16.8 billion euros for 2009.
“In four years the debt was halved,” Frerot said. “We didn’t sell the crown jewels,” rather many assets that were unprofitable and in difficulty, he said.
Veolia planned to sell 6 billion euros of assets in 2012 and 2013 and set a dividend of 70 euro cents a share each year.
Frerot said he’s “confident” of achieving the next cost-cutting goal. Veolia last year outlined plans to increase sales from dismantling nuclear plants, treating water from oil and gas operations, processing hazardous waste and the food industry.
A year ago the company said it would earn half its revenue from industrial clients within five years, up from 35 percent, and generate half of its sales from markets in Asia, Australia and Latin America. Veolia is contending with economic stagnation in France, where it got almost 40 percent of revenues in 2011.
Veolia doesn’t plan to sell its Sade water construction unit. “We aren’t planning for the moment to sell Sade,” Frerot said. “This doesn’t mean that one day we won’t decide to. No decision has been made.” Synergies have diminished and the companies’ common future is “being analyzed,” he said.