Veolia Environnement : KEY FIGURES AS OF MARCH 31, 2020

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First Quarter 2020 Results (215.3 KB)

• REVENUE OF €6 675M, SLIGHT DECREASE OF -0.5%¹ AND UP 2.3%¹ EXCLUDING COVID².
• EBITDA OF €970M, -2.9%¹ AND +4.8%¹ EXCUDING COVID²
• CURRENT EBIT OF €392M, -13.3%¹ AND +4.7%¹ EXCLUDING COVID²
• CURRENT NET INCOME GROUP SHARE OF €121M, DOWN -29.3%¹ EXCLUDING CAPITAL GAINS AND UP 3.9%¹ EXCLUDING COVID²
• NET FINANCIAL DEBT OF €11 531M DOWN €431M

¹ Variations at constant scope and forex
² The estimated COVID impacts correspond to the direct and indirect consequences of the sanitary crisis (mainly lower volumes of activity, additional costs associated with the specific adaptation measures implemented ) as measured by all the Business Units of the Group.

PRIORITY GIVEN TO CONTINUITY OF SERVICE WHILE ENSURING REINFORCED SAFETY TO OUR EMPLOYEES

MODERATE IMPACT OF SANITARY CRISIS IN Q1, AND SIGNS OF RECOVERY SINCE THE END OF APRIL

CONTINUED SUSTAINED REVENUE AND PROFIT GROWTH EXCLUDING COVID

NEW « RECOVER AND ADAPT » PLAN INCLUDING €200M OF ADDITIONAL COST CUTTING IN 2020 TO HELP US REBOUND AS SOON AS CRISIS ENDS

Antoine Frérot, Veolia's Chairman & CEO commented : « We had a very good start of the year with months of January and February showing a continued solid growth in line with previous years. The sanitary crisis the whole world is facing has created massive disorder and has put a large part of the world economy to a halt. Veolia is ready to address all these challenges. As a provider of essential services in Water, Waste and Energy, and a partner of cities and businesses, Veolia is fully mobilized and has ensured the continuity of service while providing maximum safety to our employees,and I wish to thank them personally for their contribution and their involvement.
In this particular context, Veolia has delivered a solid 1st quarter, with revenue down by only -0.5% and EBITDA down by -2.9% at constant scope and perimeter.
In order to mitigate as much as possible the consequences of this economic shock and allow the Group to get out of it in good shape, I have already launched a very ambitious adaptation plan which will increase cost savings in 2020 by an additional €200 million and cut capex by €500 million while maintaining growth capex. This cost cutting plan comes in addition to the €250 million 2020 cost savings objective. The Group's liquidity is very strong with €5.4bn of cash and €4.2bn of available credit lines. This financial strength and the Group's agility will allow us to seize opportunities when they arise as the crisis ends.'

Revenue was €6 675 million compared to €6 785 million in Q1 2019, a decrease of -1.6% at current exchange rates, of -1.3% at constant exchange rates and of -0.5% at constant scope and exchange rates.
Revenue growth in Q1 2020 continued, with a positive volume/commerce impact of +1.8% (+€120M), and an improving price effect of +€80M (1.2% of revenue) but most of these favorable dynamics were absorbed by the sanitary crisis, first in Asia and then in the rest of our geographies (total negative COVID impact of -€192M).
The sharp decrease in recycled material prices, largely due to recycled papers (-50% in our average selling prices and -74% in market prices from Q1 2019 to Q1 2020) continued until the end of March, and weighed for -€62M. It was partly offset by higher energy prices (+€30M) mostly in Central and Eastern Europe.
Exchange rate variations unfavorably impacted revenue growth by -0.4% (-€26 million) and scope impact by -0.7% (-€48M), mostly due to the divestiture at the end of 2019 of our municipal energy business in the US (TNAI) which weighed for -€116M on revenue evolution.

By geography and at constant exchange rates, the evolution is as follows:

• In France, activity was down by -3.1%. Water revenue decreased by 2.6%, due to construction works halted since the beginning of the lockdown on March 17th. Water volumes have been stable (-0.1%), with a slight decrease in March (-1%) and tariffs have progressed by 1.5%. Waste revenue was down by 3.7%, including rising volumes until mid March, followed by a sharp decrease of industrial and commercial volumes ( e.g. waste collection down 32% in March, with 70% of sorting centers closed down). Landfilled and incinerated volumes have remained up 3% in Q1 2020 vs Q1 2019.
• Europe excluding France grew by +1.1%. Solid performance in Central and Eastern Europe (+2.2%) with a good performance in both Energy, up +1.7%, and Water, up +4.7% with increased prices and volumes in spite of the unfavorable consequence of the sanitary crisis on tourism in Czech Republik. The UK (including Ireland) exhibited strong growth, with revenue up +5.4% , with a continued very good availability of the PFI (96%) and increased landfilled volumes, due to lower exports following the implementation of the Dutch import taxation. Northern Europe was down by 3.1%, due to a larger exposure to industrial services. Revenue in Southern Europe was stable despite the sharp impact of the sanitary crisis in Spain and in Italy..
• Rest of the World was down by -1.8% at constant exchange rates but up +2.2% at constant scope and forex, due the the divestiture of TNAI end 2019. Asia continued to deliver solid growth (+6.9%) despite the sanitary crisis. China revenue was nearly stable (-1% to €211M), with lower hazardous waste volumes offset by the new developments in energy and recycling. Japan posted strong growth (+10%) both in municipal water and in EPC (construction of a new lithium facility). North America was down by -20.4% but stable organically, after restatement of the TNAI divestiture. Latin America grew by +12.3% due to tariff increases in Argentina and the integration of tuck-in acquisitions in Ecuador and in Chile. The Pacific region grew by +1.6%. Africa Middle East was up by+6.0%.
• Global businesses were down by 3.6%. Hazardous waste activities have resisted well in Q1 (-1.1%) thanks to growth sectors (pharmacy, food, chemicals). Construction decreased by -1.7% : Veolia Water Technologies revenue was up +10.4% due to the construction of desalination plants in the Middle East and construction works not exposed to the sanitary crisis, but SADE revenue decreased by -13.5% , with most of construction works in France put to an halt since March 17th.

By business, as constant exchange rates : Water revenue increased slightly (+0.6%). Waste activity grew by +1.6%, with volumes down by -1.8% but up +1.7% excluding COVID and service price increases of +2.4%. Energy revenue decreased by -7.3% due to the divestiture of TNAI and slightly unfavorable weather.

EBITDA reached €970M vs. €1 031M in Q1 2019, a decrease of -5.9% at current exchange rates, of -5.3% at constant exchange rates and of -2.9% at constant scope and exchange rates.

• Scope effect was negative by -€25M and Forex by -€7M.
• EBITDA benefited from the continued cost reduction efforts which reached €64M, allowing to absorb the squeeze between increases in salary costs and contractual price indexation of -€42M. The weather impact was unfavorable at -€9M. Increased heat and electricity prices (+€36 M) more than compensated the decrease of recycled materials prices for -15 M€. COVID impact weighed in for -€80M.

Current EBIT was €392M vs. €484M in Q1 2019, -18.0% at current exchange rates, and -13.3% at constant scope and exchange rates.

• Forex effect of -€4M.
• Current EBIT was down due to EBITDA decrease. Depreciation and amortization (including Operating Financial Assets reinbursements) were up by €19M to €535M. Provisions, Fair Value adjustments and capital gains on industrial divestements were down to €3M vs. €14M in Q1 2019. Share of current net income from Joint Ventures and associates was down by €7M to €16M, due to the impact of the sanitary crisis on our chinese water concessions.

Current net income group share reached €121M vs. €209M in Q1 2019 (-40.2% at current exchange rates and -29.3% at constant scope and exchange rates and excluding financial capital gains).

• Cost of financing was stable, at -€112M. Capital gains on financial divestments decreased to €4M vs. €18M in Q1 2019.
• Current tax rate was slightly up to 27.5% vs. 24% in Q1 2019.

Net financial debt was €11 531M at 31 March 2020, down by €431M vs. March 2019.
Net financial debt benefited from net capex reduction of 9.5% to €458M, and from strict control on the seasonal variation of Working Capital Requirement, which was close to Q1 2019, at -€794M.
At March 31, 2020, the Group's cash position was particularly high at €5.4bn, plus €4.2bn of undrawn credit lines, so a total liquidity position of €9.6bn.

Outlook
As previously announced, due to the absence of visibility associated with the sanitary crisis, the 2020 objectives have been suspended.
The Group has launched since the very beginning of the crisis a specific cost savings plan of €200M which comes in addition to our annual objective of €250M. This 'Recover and Adapt' Plan aims at mitigating as much as possible the impacts of the sanitary crisis of the Group's results in 2020.
In addition to the increased cost cutting, Veolia has also initiated a program to cut 2020 capex by €500M (i.e. 20% of the initial 2020 capex budget) in order to limit the impact of the crisis on 2020 net free cash flow.

Veolia group is the global leader in optimized resource management. With over 171,000 employees worldwide, the Group designs and provides water, waste and energy management solutions which contribute to the sustainable development of communities and industries. Through its three complementary business activities, Veolia helps to develop access to resources, preserve available resources, and to replenish them.

In 2018, the Veolia group supplied 95 million people with drinking water and 63 million people with wastewater service, produced nearly 56 million megawatt hours of energy and converted 49 million metric tons of waste into new materials and energy. Veolia Environnement (listed on Paris Euronext: VIE) recorded consolidated revenue of €25.91 billion in 2018 (USD 30.6 billion). www.veolia.com

Important disclaimer

Veolia Environnement is a corporation listed on the Euronext Paris. This press release contains 'forward-looking statements' within the meaning of the provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including but not limited to: the risk of suffering reduced profits or losses as a result of intense competition, the risk that changes in energy prices and taxes may reduce Veolia Environnement's profits, the risk that governmental authorities could terminate or modify some of Veolia Environnement's contracts, the risk that acquisitions may not provide the benefits that Veolia Environnement hopes to achieve, the risks related to customary provisions of divesture transactions, the risk that Veolia Environnement's compliance with environmental laws may become more costly in the future, the risk that currency exchange rate fluctuations may negatively affect Veolia Environnement's financial results and the price of its shares, the risk that Veolia Environnement may incur environmental liability in connection with its past, present and future operations, as well as the other risks described in the documents Veolia Environnement has filed with the Autorités des Marchés Financiers (French securities regulator). Veolia Environnement does not undertake, nor does it have, any obligation to provide updates or to revise any forward looking statements. Investors and security holders may obtain from Veolia Environnement a free copy of documents it filed (www.veolia.com) with the Autorités des Marchés Financiers. This document contains 'non‐GAAP financial measures'. These 'non‐GAAP financial measures' might be defined differently from similar financial measures made public by other groups and should not replace GAAP financial measures prepared pursuant to IFRS standards.

Contacts

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