Suez Environnement Eyes Purchases as Macau Sale Doubles Profit

Suez Environnement, Europe’s second-biggest water company, is targeting asset purchases this year, buoyed by profit that more than doubled in the first half because of a one-time gain from a stake sale.

Acquisitions are “on its radar” as “financial flexibility” was preserved even after an increase in Suez’s stake in a Spanish unit, Chief Executive Officer Jean-Louis Chaussade said on a conference call to discuss earnings released today. The Paris-based utility is looking to expand in Italy and develop its businesses, including industrial water treatment, in India and other markets outside Europe, he said.

Net income climbed to 280 million euros ($375 million) from 132 million euros a year earlier after the sale of an indirect stake in Cia. de Electricidade de Macau, Suez said in a statement. The 1.326 billion euros earned before interest, taxes, depreciation and amortization beat the 1.32 billion euro average estimate of six analysts surveyed by Bloomberg.

Suez has a “wish list” of possible acquisition targets and the financial flexibility to complete the deals, Chief Financial Officer Jean-Marc Boursier said in an interview in February. Suez and larger rival Veolia Environnement SA have reported signs of a revival in waste-handling in Europe this year after a protracted slump when factories reduced output amid the region’s economic crisis.

‘Growing Strongly’

“Waste Europe activities are steady with very uneven industrial production country by country,” Chaussade said in today’s statement. “The water Europe division is growing strongly, benefiting from very significant increases in prices and volumes.”

Suez shares, up 12 percent this year, gained as much as 4.3 percent to 14.65 euros and traded at 14.62 euros as of 9:21 a.m. in Paris.

Treated waste volumes rose 1.2 percent in Europe and the utility reaffirmed financial targets for the year. Net financial debt was 7.295 billion euros at the end of June, an increase of 109 million euros from the end of 2013.

Suez has set a target for Ebitda growth from current assets this year of at least 2 percent, debt-to-Ebitda of about three times and free cash flow of about 1 billion euros. Ebitda in 2013 was 2.52 billion euros, falling short of a goal of 2.55 billion euros.

The company this month agreed to buy the 24 percent stake in Barcelona water company Sociedad General de Aguas de Barcelona it doesn’t own for stock and 299 million euros in cash.

Financial Maneuvering

The utility’s room for financial maneuvering won’t be affected by the Agbar deal, Chaussade said on today’s call. Suez wants to grow in countries where it is already present as well as in areas like “intelligent” water systems.

In Italy, the French utility wants to be a partner with a company that can “consolidate” the market, he said. Suez is “satisfied” with its shareholding and influence in Acea SpA, which manages water and power for Rome and in which Suez increased its stake earlier this year.

Suez and Veolia compete in France for municipal waste and water services and worldwide for large treatment installations including desalination plants. Both companies have adopted similar strategies to expand in faster-growing locations such as China, India and North Africa and provide services for world-spanning industrial companies and industries such as oil and gas.

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