Veolia Plans to Lift Payouts Through 2018 as Profit Rebounds

  • Veolia expects 2018 net income to exceed 800 million euros
  • Company sees annual dividend gain of about 10% in 2016-2018

Veolia Environnement SA will increase its dividend in the next three years as higher revenue and lower costs boost earnings and cash flow at the French waste and water-treatment company.

Recurring net income will exceed 800 million euros ($877 million) in 2018, up from its estimates of more than 550 million euros for 2015, the Paris-based company said Monday in a statement. It will propose a dividend of 0.73 euro per share for this fiscal year, up from 0.70 euro a year earlier, with the payout climbing by about 10 percent annually to 2018.

The utility expects to expand in the coming years after selling more than 7 billion euros of assets since 2012 to halve its debt as sluggish industrial production growth in France hurt demand for waste and water treatment.

“We now begin a new plan for the 2016 to 2018 period, which is based on a return to growth,” Chief Executive Officer Antoine Frerot said in the statement. The company will have “an improved balance between municipal and industrial client activities, including stronger growth outside of Europe.”

Veolia shares rose as much as 3 percent and were 2.5 percent higher at 21.65 euros as of 12:14 p.m. in Paris.

Revenue Outlook

The French company expects revenue to climb by 2 percent to 3 percent per year on average over the next three years, reaching more than 27 billion euros in 2018.

Earnings before interest, taxes, depreciation and amortization will be about 3.5 billion euros in 2018, up from its estimate of about 3 billion euros this year, as the company expects cost savings of more than 600 million euros over the three years through 2018. Assuming capital expenditure of 1.6 billion euros to 1.7 billion euros per year, net free cash flow before the dividend payment should almost double in 2018 to about 1 billion euros, the company said.

Veolia’s net debt will be little changed in 2018 compared to 2015 as the company will fund “medium-sized” acquisitions in the range of 200 million euros to 500 million euros with asset sales, Frerot said at a press conference in Paris. The company’s pipe-installer unit Sade will probably be sold in the first half next year, while Veolia has no plan to sell its French water business, the CEO added.

The company expects revenue in France to climb to 5.5 billion euros from an estimated 5.4 billion euros in 2015, with the Ebitda “performance” there to remain stable, Frerot also said, without giving more details.

On top of sluggish industrial and consumer spending growth as well as productivity gains from customers, the French unit has suffered from pressure on water prices as most of its long-term contracts with municipalities expired during the 2010-2015 period, prompting re-negotiations, Frerot said.

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