Veolia Environnement : PR - Annual results 2020

Press Release

Paris, 25th of February 2021

ANNUAL RESULTS 2020

STRONG RESILIENCE AND REBOUND CAPACITY IN THE FACE OF THE CRISIS

NET CURRENT INCOME GROUP SHARE OF €415M

4th QUARTER RESULTS ABOVE 2019 AND ABOVE EXPECTATIONS, CONFIRM THE STRONG REBOUND THE 3rd QUARTER

FILING OF A TENDER OFFER ON SUEZ ON FEBRUARY 8th 2021 AT €18 PER SHARE DIVIDEND INCLUDED

• • 2020 REVENUE OF €26 010M

  RETURN OF GROWTH IN Q4, TO +0.9%(1)

• • 2020 EBITDA OF €3641M, ABOVE THE GROUP'S REVISED TARGET, THANKS TO €278M

  IN EFFICIENCY GAINS, COMPLEMENTED BY THE RECOVER AND ADAPT PLAN

  EBITDA UP +4.2%(1) IN Q4

• • NET CURRENT INCOME GROUP SHARE OF €415M

• • PROPOSAL TO INCREASE THE DIVIDEND FOR YEAR 2020 TO €0.70 PER SHARE **********************

2021 PROSPECTS(2)

•
REVENUE ABOVE 2019 LEVEL THANKS TO SOLID ORGANIC GROWTH
•	EBITDA ABOVE €4BN
•	NET FINANCIAL DEBT BELOW €12BN AND LEVERAGE RATIO BELOW 3x
•	OBJECTIVE TO RECOVER THE PRE-CRISIS DIVIDEND POLICY AS SOON AS 2021

• (1) At constant forex vs. 2019

• (2) At constant forex

Antoine Frérot, Veolia's Chairman & CEO commented: «In 2020, Veolia has once again proven its remarkable capacity for resiliency in a significantly worsened economic context due to the unprecedented global sanitary crisis. The Group had already recovered its 2019 level of activity in the third quarter, a rebound which was amplified in the 4th quarter, with revenue growing and EBITDA up 4.2%. These very encouraging results have been achieved thanks to the outstanding commitment of all the employees of the Group, and thanks to the adaptation measures put in place at the very beginning of the sanitary crisis. Veolia will have thus wiped out all the impacts of the crisis and recovered its growth trajectory and its operating leverage in less than 6 months. In 2021, the Group should therefore achieve higher performance than in 2019.

Moreover, in 2020, Veolia has seized the unique opportunity to create the world champion of ecological transformation by acquiring 29.9% of the capital of Suez. On February 8th 2021, we filed a public tender offer for the remaining 70.1% of Suez's shares. Thanks to a unique complementarity, the new Group resulting from this industrial project will be ideally positioned to tackle the huge challenges our planet is facing, at a time when the environmental priority has never been stronger. »

**************************

Revenue of €26 010 million compared to €27 189 million in 2019, a decrease of -4.3% at current exchange rates, of -2.9% at constant exchange rates and of -2.5% at constant scope and exchange rates.

Exchange rate variations unfavorably impacted revenue growth by -1.5% in 2020 (-€401 million).

At constant forex, revenue decreased by 2.9%, penalized in the 1st (-1.3%) and in the 2nd quarter (-11.0%) by the sanitary crisis and the lockdowns put in place, then rebounded in Q3 (-0.6%) and grew back again in the 4th quarter (+0.9%).

In Q4 despite the second wave of the sanitary crisis impacting commercial and tertiary waste which volumes were slightly down compared to 2019, France and Rest of Europe segments have confirmed their rebound initiated in Q3. Activity in Rest of the World almost recovered its 2019 level (reaching in the 4th quarter 98.5% of Q4 2019 at constant scope and exchange rates, i.e. excluding mainly the divestiture of the municipal energy assets in the US in 2019). Global businesses rebounded in the 3rd quarter (notably construction) and then stabilized in the last quarter of the year.

For the full year, at constant forex, revenue decreased by 2.9%, mainly due to the effects of the sanitary crisis on activity levels and construction, for a total of €915M (-3.4%). Scope impact was -€102M (-0.4%) mainly due to the divestiture of the municipal energy assets in the US in 2019 partially offset by an acquisition in hazardous waste in Chile in 2019, and in 2020, the acquisition of a plastic recycling activity in Spain, of waste treatment assets in Russia, and of municipal energy assets in Central and Eastern Europe.

The impact of energy and recycled materials prices was non-significant, -€40M, or -0.1%, including a favorable energy price effect of +€68M more than offset by lower recyclate prices for -€108M. Service prices were up by 1% (+€286M). Weather effect was neutral.

In the waste activity, the impact of lower volumes and activity levels was -5.2% in 2020, while recycled material prices weighed by -1.1%.

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

• o In France, revenue decreased by 3.9%. Water activities declined by 2.2% mostly due to lower works during the lockdown period in the 1st half. After a revenue decrease of 6.4% in H1, activity was back to growth in H2, to +1.7%, including a revenue growth in Q4 of +2.5%. In 2020, water volumes grew by 0.8% (after a 2019 year already strong in terms of volumes), and tariffs were up by 1.5%. Waste revenue declined by 5.9% in 2020, with volumes down by 5.7% and prices up by 2.3%, and recycled materials prices sharply down in the beginning of the year bounced back in Q4. Waste activities recovered growth in the second half (+1.6%), including in particular +2.5% in Q4.

• o Europe excluding France has proven very resilient in the face of the crisis, and grew by 0.4% for the full year, of which +5.3% in the 4th quarter. This progression is mostly attributable to Central and Eastern Europe, up by 6.3%, and +14.9% in Q4. Energy revenue grew by 7.1%, thanks to energy price increases, a favorable weather in Q4 and the integration of the district heating network of Prague Right Bank and cogeneration assets in Budapest. Water revenue progressed by 1.3%, due to tariff increases and good volumes except for Prague, penalized by lower tourism. Northern Europe revenue declined by 3.1%, due to lower commercial and industrial waste volumes in Germany and to lower prices and volumes of recycled materials, but grew again in Q4 (+1.1%) thanks to the recovery of a normal level of activity. UK (and Ireland) exhibited a 4.6% revenue decline, due to the lockdown period. Commercial and industrial waste volumes reached about 90%of their 2019 levels in Q3, but decreased again in Q4. PFI facilities performed very well, showing an average availability rate of 94.1% vs. 93.8% in 2019, whereas landfilling decreased by 7.6%. Lower revenue was more than offset at the EBITDA level thanks to excellent operational efficiency. Southern Europe performed well, with revenue up 2.1% and +6.1% in Q4, with in particular solid dynamics in Spain and Portugal.

• o Rest of the World revenue came out slightly down, by 1.7% at constant scope and exchange rates. Asia progressed by 0.7%. Growth has been slowed by lower construction revenue in Hong Kong and in Japan. China recovered solid growth in Q4, +4.1%, notably due to the continued very strong growth of hazardous waste activity (+27%). Latin America grew by +6.6%, thanks to tariff increases and the integration of tuck-ins. North America revenue decreased by 3.2% at constant scope and exchange rates mainly due to lower activity with refineries. Pacific was resilient, with revenue almost flat, -0.7%, and up 0.8% in Q4. Africa Middle East was stable in 2020.

• o Global businesses revenue decreased by 5.3% at constant exchange rates and were stable in Q4. In Construction activities, Veolia Water Technologies grew by +3.7%, with notably good performances of desalination, and Sade was down by 6.8% but rebounded sharply in the second half, with the restarting of construction works after the lockdown (+8.1% at constant scope and perimeter in Q4). Hazardous waste business was hit by lower industrial activity in the 1st half, but has recovered volume levels close to 2019, with only the unfavorable impact of lower used oils recycling prices. Industrial and energy services activity decreased by 17% due to lockdown.

By business, at constant exchange rates, Water revenue was slightly down, -1,0%, with stable volumes (-0.2%), increased prices (+0,7%) but lower construction works due to sanitary crisis. Waste revenue declined by -3.2%, with volumes down by -5.2% and prices up +2.0%. Energy revenue decreased by -5.8% but only by -2.0% at constant scope and forex, after the divestiture of the municipal energy business in the US end 2019.

EBITDA of €3 641M vs. €4 022M in 2019

• o Forex effect was negative by -€59M, of which -€21M in Latin America and -€20M in Central and Eastern Europe. Scope effect was also unfavorable by -€36M, due to the divestiture of the municipal energy business in the US end 2019, partially offset by targeted acquisitions in Central Europe.

• o 2020 EBITDA decreased by 8.0% at constant forex and by 7.1% at constant scope and forex mostly due to lower activity levels and volumes for a total of -€443M (which amount was reduced thanks to the specific Recover and Adapt plan put in place), resulting largely from the sanitary crisis. The price cost squeeze impact of €142M was more than offset the recurring efficiency savings of €278M. Weather effect was neutral. Energy and recycled materials prices had a net positive impact of +€28M.

• o By segment: EBITDA in France reached €848M vs. €900M in 2019. EBITDA in Rest of Europe was €1 404M vs. €1 501M. EBITDA in Rest of the world reached €942M vs. €1 162M but includes the effect of the divestiture of the heating business in the US for -€84 M. Finally the EBITDA of Global Businesses totaled €324M vs. €396M in 2019.

Current EBIT of €1 275M vs. €1 730M in 2019

• o Forex effect was negative by -€25M.

Current EBIT at constant forex decreased by 24.8% and by 21.2 % at constant scope and forex due to :

• o EBITDA decrease mainly,

• o Stable Depreciation and Amortization of €2 190M in 2020 vs. €2 192M in 2019, resulting from the control on maintenance capex in order to focus on growth capex. Renewal expenses were also nearly flat at €275M vs. €280M in 2019.

• o The « Provisions, fair value adjustment and other items » evolution was unfavorable by €64M, and reached -€12M in 2020, vs. a net reversal of +€52M in 2019, which was due to ended litigations.

• o And finally a decrease in the current net income of joint-ventures and associates, to €111M vs.€130M in 2019 due to temporary lower water volumes in our Chinese concessions, due to the sanitary crisis.

Current net income group share of €415M vs. €760M in 2019

• o Cost of financing is significantly down, to -€414M vs. -€441M in 2019, thank to favorable debt refinancing

  and an improved remuneration of our cash. Gross cost of borrowing reached 2.44% vs. 3.06% in 2019.

  Net financial capital gains are stable, at €26M vs. €24M in 2019.

• o Tax rate stood at 26.1%. Tax charges amounted to €160M vs. €227M in 2019.

• o Non-controlling interests were stable, at -€146M vs. -€147M in 2019.

Net income group share of €89 M, vs. €625M in 2019

• o Restructuring charges are sharply down, to €95M vs. €121M in 2019 but asset impairments are up to €231M vs. €184M in 2019, mostly from Morocco and Latin America. .

Net Free cash-flow reached €507M thanks to strict capex control (€2 151M down by €50M) and to another improvement of WCR (down €233M thanks to a very strict cash collection policy).

Net financial debt of €13 217M

• o In 2019, net financial debt benefitted from the divestiture of our municipal energy assets in the US for $1.25bn. In 2020, the Group has reinvested €1 476M in targeted acquisitions and has financed the acquisition of the 29.9% stake in Suez for €1 453M in debt. Leverage ratio stood at 3.2 x at 31/12/2020, excluding the purchase of the 29.9 % stake in Suez. Excluding M&A, net financial debt is down by €392M, to €10 288M.

*********

Increase of the dividend, to €0.70 per share, to be paid at 100 % in cash with respect to the 2020 fiscal year.

Veolia's Board of Directors will propose to shareholders at the Annual General Shareholders Meeting on April 22, 2021 the payment of a dividend of €0.70 per share with respect to the 2020 fiscal year, payable in cash. The ex-dividend date is fixed at May 10, 2021. 2020 dividends will be paid starting as of May 12, 2021.