Veolia Environnement : PR - First half year results

Press Release

Paris, 3 August 2022

2022 FIRST HALF RESULTS

CONTINUED STRONG REVENUE AND RESULTS GROWTH IN Q2

SUCCESSFUL SUEZ INTEGRATION

VEOLIA'S RESILIENCE AND ADAPTABILITY ALLOW TO FULLY

CONFIRM OUR AMBITIOUS 2022 TARGETS, NOTABLY AN ORGANIC EBITDA GROWTH BETWEEN +4 % AND +6 % AND A CURRENT NET INCOME OF €1.1BN DESPITE THE UNCERTAIN CONTEXT

• REVENUE OF €20 196 M, A GROWTH OF +46.2 % COMPARED TO H1 2021 REPORTED, THANKS TO THE INTEGRATION OF SUEZ ACTIVITIES AND STRONG ORGANIC GROWTH
• EBITDA OF €2 953 M, A GROWTH OF +40.4 % COMPARED TO H1 2021 REPORTED
• CURRENT EBIT OF €1 475 M, A GROWTH OF +63 % COMPARED TO H1 2021 REPORTED
• CURRENT NET INCOME OF €528M
• REVENUE OF €20 196 M(1) UP +12.9 %(2) COMPARED TO COMBINED H1 2021 (1)
  EXCLUDING ENERGY PRICE IMPACT, UNDERLYING ORGANIC COMBINED REVENUE(1) GROWTH OF +6.7 %
• EBITDA OF €2 953 M(1), UP +6.1 %(2) COMPARED TO COMBINED H1 2021, AT THE TOP

OF THE GUIDANCE RANGE OF +4 % TO +6 % IN 2022

• CURRENT EBIT €1475 M(1), A STRONG GROWTH OF +20.2 %(2) VS. COMBINED H1 2021(1)
• €178 M OF EFFICIENCY GAINS IN H1 COMPLEMENTED BY €52 M OF SYNERGIES

COMING FROM THE ACQUISITION OF SUEZ, IN LINE WITH ANNUAL TARGET



• CURRENT NET INCOME GROUP SHARE OF €528 M IN LINE WITH THE ANNUAL OBJECTIVE OF AROUND €1.1 BN(3), WITH A 2022 EPS ACCRETION OF +10%(4)
• 2022 GUIDANCE FULLY CONFIRMED



1. H1 2021 and H1 2022 are restated from the1st 17 days of January (Revenue €400 M -EBITDA €49 M). H1 2021 combined includes the European and Australian assets the antitrust authorities required to divest, and are not accounted for in H1 2022.
2. At constant scope and exchange rates
3. Excluding PPA
4. EPS including hybrid costs and before PPA

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Press Release

Paris, 3rd August 2022

Estelle Brachlianoff, CEO of the Group commented : « Veolia's performance during the first half of the year was once again very good. Q2 activity was on a very similar trajectory as in the first quarter. The integration of Suez's activities since mid-January was very successful. Their contribution in terms of revenue and synergies is up to our expectations, which confirms the merits of this acquisition. These very good results also benefited from the continued strict cost discipline which allowed us to fully confirm our 2022 objectives.

Veolia, world leader in ecological transformation, continues to fully benefit from good trends in its markets thanks to its value-added offerings, perfectly adapted to the environmental challenges of our clients. The resilience, the adaptability and the relevance of our strategic positioning allow us to face the uncertain macroeconomic and geopolitical context with confidence.»

• Revenue of €20 196 M, up 46.2 % at constant exchange rates vs. H1 2021 reported due to a scope effect of €4 350 M mainly coming from the integration of Suez (€4 416 M) and from an organic growth of €1 961M (+14.4 %).
• Compared to 30 June 2021 combined, revenue growth at constant scope and exchange rates was +12,9 %.
• Revenue evolution by effect was as follows :

Exchange rate effect was +€408 M reflecting mainly the evolution of the US dollar, sterling pound and Chinese Renminbi, partially offset by a decrease of Polish zloty and Latin American currencies1.

Scope effect of -€286M included mainly the asset divestitures in Scandinavia in 2021 (-€154 M) and, on the Suez side, the asset divestitures in Australia in 2021 and the remedies in the EU (hazardous waste business in France accounted as assets for sale). These negative items were partially offset by the integration of Osis by Sarp (+€96 M) in 2021.

• • The Commerce / Volumes / Works effect reached +€542 M, thanks to good volumes in all businesses, notably in Energy and strong Water technologies and construction activities.
  • The weather impact was -€96 M mainly in Energy in Central and Eastern Europe due to a mild winter, and in Chile due to a cool summer which impacted Q1 volumes.
  • The energy price impact was +€1 107 M, due to the increase in heat and electricity prices in Central and Eastern Europe.
  • The recycled materials price impact reached +€242 M, and came from the increase of recycled paper and cardboard prices in France, Germany and the UK.
  • Service prices continued to be well oriented, leading to a favorable impact of +€505 M, due mostly to tariff revisions in Waste (+3.2%) and in Water (+3.1%)
• Revenue in H1 2022 progressed across all segments compared with combined figures for the half year ended June 30, 2021
• • Revenue for the France and Special Waste Europe segment totaled €4,754 million, with organic growth of +3.9% compared with June 30, 2021 combined figures:
  • • France Water revenue slipped slightly by -0.8%, mainly due to asset transfers within the Group, partially offset by the positive impact of tariff reviews (+3.4% in H1 2022) and good activity levels in the second quarter, with billed volumes up +0.3% at the end of June.

• Main foreign exchange impacts by currency: US dollar (+207 million euros), British pound (+60 million euros), Czech crown (+44 million euros), Chinese yuan RenMinBi (+51 million euros) , Polish zloty (-21 million euros), Hungarian forint (-23 million euros), Chilean peso (-15 million euros), Argentine peso (-14 million euros).

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Press Release

Paris, 3rd August 2022

• • France Waste revenue increased +6%, continuing to benefit from high recyclate prices, particularly for paper (recycled paper price of €183/t in June 2022 vs. €152/t in June 2021), and the positive impact of tariff reviews, despite a slight decline in volumes year-on-year.
  • Hazardous waste activities in Europe grew +7.4%, with strong commercial development in sanitation and industrial maintenance activities, higher volumes and prices in oil and lubricant treatment activities in a context of increased oil prices and the positive impact of tariff reviews.
  • SADE reported growth of +2.5%, thanks to strong commercial momentum in France.
• Revenue for the Europe excluding France segment totaled €8,505 million for the half year ended June 30, 2022, with organic growth of +23.7% mainly due to higher energy and recyclate prices.
• • In Central and Eastern Europe, revenue rose +31.4% to €4,301 million. Following on from the first quarter, activity remained robust in this region driven by:
  • • greater positive tariff indexation in energy (Poland, Hungary, Czech Republic, Slovakia and Romania) and water (Czech Republic and Romania) and higher volumes distributed (Poland and Czech Republic), despite a less favorable weather effect in Energy compared with H1 2022 (-€96 million).
    • a surge in recyclate prices, particularly for paper and plastic and energy prices in Germany.
  • In Northern Europe, revenue rose 12.3% to €2,511 million. This increase was primarily driven by the United Kingdom and Ireland, which reported revenue growth of +12.4% at constant scope and exchange rates, with the favorable impact of recyclate prices (paper and plastic), higher energy volumes and prices and the good performance of incinerators (facility available rate of 94.8% in 2022 compared with 93.1% in 2021), despite a slight downturn in waste landfill volumes due to unfavorable weather conditions in H1 2022. In Belgium, organic growth was +16.2% compared with June 30, 2021 combined figures, fueled by good operating performances, benefiting from the positive impact of recyclate prices and contractual tariff reviews in waste recycling and incineration activities.
  • In Italy, organic revenue growth reached +49.1%, following the start-up of contracts won in 2021 and the highly favorable effect of energy prices.
  • In Iberia, revenue increased +14.8%, driven primarily by strong water activities in Spain (Agbar) which enjoyed increased volumes (+2.2% at end-June 2022) thanks to the return of tourism and high Spring temperatures, as well as by energy activities.
• In the Rest of the world, revenue totaled €5,256 million, representing organic growth of +7.8% across all geographies, including Asia despite the slowdown in China:
• • Revenue increased +13.8% in Latin America, driven notably by favorable tariff indexation in Chile in water activities, despite a drop in volumes linked to the drought. Colombia, Brazil and Ecuador reported good activity levels in waste and stable water activities in the half-year.
  • In Africa/Middle East, revenue increased +9.0%, mainly driven by growth in water contracts in Morocco, thanks to higher volumes and the positive impact of tariff reviews in the first half of the year.
  • In North America, revenue rose +9.6% to €1,538 million. This growth was mainly driven by robust hazardous waste activities, with higher volumes processed and the impact of increased tariffs (+10%), and in water, by favorable tariff indexation, particularly in Regulated Water activities, and good construction volumes.
  • Revenue increased +3.3% in Asia. The slowdown in growth in China negatively impacted activities in the second quarter, with lower hazardous waste volumes and reduced activity in energy and

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Press Release

Paris, 3rd August 2022

industrial services. This slowdown was offset by strong growth in other countries and particularly Taiwan, Hong Kong and Japan.

• • • In the Pacific, revenue rose +5.7%, marked by higher waste collection and landfill volumes despite severe weather events in the half-year (flooding in the Queensland and New South Wales regions), strong industrial maintenance activities and good municipal water performance.
  • The Water Technologies activity reported an increase of +5.3%, driven by growth in VWT's Services and Technology activities. The major projects activity reported a slight decline, however, due to a high comparison base in 2021 which benefited from three major desalination projects in the Middle East. VWT bookings totaled €687 million as of June 30, 2022, compared with €723 million one year earlier.
• Compared with combined figures for the half year ended June 30, 2021, revenue by business rose +12.9% at constant scope and exchange rates. The main changes by business compared with combined figures for the half year ended June 30, 2021 break down as follows.
• • Water revenue
  • • Water Operations revenue increased +6.4%, with good volumes in Spain following the return of tourism, the impact of O&M contract wins in North America, accompanied by higher tariffs and an upturn in volumes distributed in France in Q2 2022. Slightly lower volumes due to the weather, particularly in Chile, were largely offset by the positive effect of contract tariff reviews in these geographies.
    • Technology and Construction revenue grew +4.7%, mainly driven by increased construction activity in France, growth in VWT's Services and Technology activities, and WTS growth (+10.3%).
  • Waste revenue
  • • Waste revenue increased +9.9%, benefiting from the continued high level of recyclate prices (+3.4%) for paper, plastic and metals In Europe. The upward trend in oil prices and good activity levels had a favorable impact on hazardous waste activities in Europe and North America. Electricity revenues generated by incineration activities increased and favorable tariff reviews (+3.2%) were recorded across all geographies. The commerce / volume effect is also positive at +1.3%.
  • Energy revenue
  • • Energy revenue rose +35.9%. The strong activity growth is founded on a positive price effect (+29.4%), notably in Europe, higher volumes distributed, tariff increases in Central and Eastern Europe and strong commercial development, particularly in Italy and the Middle East. The weather effect in H1 2022 was -2.5%.
• EBITDA reached €2 953 M vs. €2 792 M in H1 2022 combined and €2 081 M in H1 2021 reported
• • EBITDA grew by +40.4 % vs.30 June 2021 reported at constant forex. The scope effect coming from the consolidation of Suez was €732M.
  • Compared to 30 June 2021 combined, EBITDA increased by +6.1 % at constant scope and forex.
  • EBITDA evolution by effect vs. 30 June 2021 combined was as follows :

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• • Exchange rate effect was +€52 M, reflecting mainly the evolution of UK, US and Chinese currencies.
  • The scope effect was -€61M including mainly the impact of the integration of Osis by Sarp offset by the asset divestitures in Scandinavia in 2021 and, on Suez side, by the asset divestitures in Australia and the remedies in the EU (hazardous waste business in France accounted for as assets for sale).
  • The Commerce / Volumes / Works effect reached +€39 M after +€22M in Q1, thanks to solid activity growth
  • The weather impact was -€39 M, after -€27M in Q1, mainly in Energy in Central and Eastern Europe due to a mild winter.
  • The recycled materials price impact reached +€70 M, and came mainly from the increase of recycled paper and cardboard prices in France, the UK and Germany. The increase in heat and electricity prices was offset by higher fuel costs (of which gas oil and CO2).
  • Impact of contract renegotiations and cost inflation on EBITDA was -€97 M.
  • Efficiency gains and synergies contributed for +€178M in efficiency gains and +€52M in synergies, a total of +€230 M,in line with the annual objective.
• Current EBIT at June 30 2022 reached €1 475 M, up +20.2 % at constant scope and forex compared to H1 2021 combined.
  Current EBIT progression compared to 30 June combined was +€256 M at constant scope and forex, thanks to:
• • Strong EBITDA growth (+€171 M at constant scope and exchange rates).
  • D&A and provisions including the impact of Operating Financial Assets reimbursement was down by -€34M vs. H1 2021 combined to €1 454M.
  • A favorable impact coming from Industrial capital gains net of asset impairments of +€22M, from €42M in H1 2021 to €64M , due mostly to an asset disposal in Australia.

Exchange rate effect on Current EBIT was +€17 M.

• Current net income Group share reached €528 M in H1 2022.
• • Cost of net financial debt reached -€320 M, including an increase of €105M due to the consolidation of Suez net financial debt. The Group's financing rate was back to 2019 and 2020 levels after a 2021 exceptionally low level.
  • Other financial income and expenses (including net financial capital gains) capital amounted to -€207M vs. +€53M in H1 2021 reported, which included +€122M of dividends received from our 29.9% stake in Suez. .
  • Current tax charge was €256M, up by €68M due to the increase of profit before tax. Current tax rate was 28.9 % vs. 25 % in H1 2021 reported.
  • Non-controllinginterests reached €164M vs. €98M in H1 2021 reported.
• Net income Group share reached €236M.

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