Media

2016 ANNUAL RESULTS

23 february 2017

2016 ANNUAL RESULTS[1]
 
REVENUE[1] WAS NEARLY STABLE AND RESULTS EXCEEDED OBJECTIVES

  • REVENUE DOWN 0.4%TO €24,390 MILLION. IMPROVEMENT AT THE END OF THE YEAR (+1.9%2 IN THE FOURTH QUARTER).
  • EBITDA INCREASED 4.3%2 TO €3,056 MILLION.
  • GROWTH IN CURRENT EBIT OF 8.5%TO €1,384 MILLION.
  • STRONG GROWTH IN CURRENT NET INCOME-GROUP SHARE, UP 10.8%2 TO €610 MILLION, AND UP 19.3%2EXCLUDING FINANCIAL CAPITAL GAINS.
  • NET FREE CASH FLOW GENERATION OF €970 MILLION DUE TO A SIGNIFICANT REDUCTION IN WORKING CAPITAL REQUIREMENTS
  • NET FINANCIAL DEBT DECLINED €359 MILLION TO €7,811 MILLION, RESULTING IN A LEVERAGE RATIO BELOW 2.6X.
  • POST-TAX ROCE OF 7.2%, REPRESENTING CONTINUED IMPROVEMENT OVER THE LAST FOUR YEARS.
  • PROPOSED INCREASE IN 2016 DIVIDEND TO €0.80 PER SHARE, PAID IN CASH.

Medium Term Outlook[3]

  • 2017: A transition year, with a resumption of revenue growth, stable EBITDA or moderate EBITDA growth, and increased efforts to reduce costs by more than €250 million
  • 2018: Continuation of revenue growth and the resumption of more sustained EBITDA growth, with an objective of more than €300 million in cost savings
  • 2019: Continuation of revenue growth and full impact of cost savings.  EBITDA expected between €3.3bn and €3.5bn[4] (excluding IFRIC 12)

Antoine Frérot, Veolia Environnement’s Chairman & CEO commented: “2016 represents another year of strong results growth for Veolia.  Our margins have continued to improve and we achieved net free cash flow of nearly €1 billion.  Revenue also improved significantly in the fourth quarter, with 1.9% growth at constant exchange rates.  These good results were achieved due to the efforts of each and every one of our Group’s employees, and I would like to thank them. At the end of 2015, we presented our 3-year development plan.  It is based on controlled and profitable growth and accompanied by continued cost reduction efforts. Our ambition remains intact.  The last quarter of 2016 showed that Veolia has demonstrated the capacity to generate growth and I wish to further accelerate growth by committing additional resources. In addition, our business situation has toughened during recent months.  In order to finance reinforced commercial efforts and address this new reality, we are intensifying our cost savings program to drive €800 million in savings over the 2016-2018 period compared with the previous expectation of €600 million.  These additional efforts will enable Veolia to continue on the path of profitable growth.” 
  • At current consolidation scope and exchange rates, revenue declined 2.3% from €24,965 million in 2015 to €24,390 million in 2016.
  • At constant exchange rates, revenue in 2016 was nearly stable (-0.4%) compared to 2015, but increased 2.0% excluding the impact of lower energy prices (-€128 million) and excluding the impact of less construction revenue (-€484 million). The foreign exchange impact on revenue amounted to -€473 million, including -€276 million related to the decline in the U.K. pound sterling, -€91 million related to the Argentine peso, -€29 million related to the Chinese renminbi and -€39 million related to the Polish zloty.
  • The fourth quarter posted a return to revenue growth, to +1.9% at constant exchange rates (following   -2.1% in Q1, +0.1% in Q2 and -1.7% in Q3), and with a meaningful acceleration in growth excluding the impact of construction revenue and energy prices, to +3.4% at constant exchange rates in the fourth quarter (following +1.2% in Q1, +1.9% in Q2 and +1.6% in Q3).
  • In France, revenue declined by 1.0%. Water revenue was stable, given weak price indexation (+0.2%). In addition, the Lille contract award offset the impact of the lower water volumes (-1.5%). Waste revenue declined by 2.4%.  Growth in incineration and landfill activities partially offset reduced municipal collection volumes (-10.3%) and the reduction in scrap metal revenue (Bartin divestment finalized at the end of November 2016).
  • At constant exchange rates, Europe excluding France segment revenue was stable (+0.1%), but grew +1.5% in the fourth quarter. Central Europe revenue was stable due to a favorable weather impact, start of biomass cogeneration in Hungary and higher water volumes (+1.3%) which offset the impact of lower energy prices. Germany revenue improved 2.2%, with a reduction of 3.5% in Energy revenue, but a 6.1% increase in Waste revenue given good volumes. United Kingdom revenue was down 1.4% at constant exchange rates, but up 2.1% excluding construction revenue (completion of Leeds PFI). 
  • The Rest of the World segment revenue grew 3.7% at constant exchange rates, including +9.1% in the fourth quarter. At constant exchange rates, North America revenue was stable (+0.6%), as the integration of the sulfuric acid regeneration business from Chemours offset the impact of reduced industrial services activity and the negative impact of mild weather and lower energy prices. Latin America posted strong growth (+12.9%), as did Asia (+6.3%), driven by China (+14.8%) and Africa Middle East (+6.8%). Revenue in Australia was down by 3.1% due to reduced industrial services activity.
  • Global Businesses revenue decreased by 4.1% at constant exchange rates, with growth in hazardous waste (+2.4%) and the continued downsizing of engineering activities (VWT) and civil engineering (SADE). 
By business, and at constant exchange rates, Water revenue declined by 1.5% to €11,138 million due to lower construction revenue, while Waste revenue increased 0.5% to €8,401 million given a 0.6% increase in revenue due to higher volumes and service price increases of 0.8%.  Energy revenue increased 0.4% to €4,851 million, including the impact of lower energy prices, as well as a slightly favorable weather effect (+€35 million) and good volumes in China. Excluding the impact of lower energy prices and construction revenue, each business increased revenue at constant exchange rates by +1.8%, +1.6% and +3.2%, respectively.
The reinforcement of the percent of revenue generated by industrial clients continues, representing 45% of 2016 revenue compared with 44% in 2015. 
 
  • EBITDA improved 2.0% at current consolidation scope and exchange rates (+4.3% at constant exchange rates) to €3,056 million
    • Exchange rate movements negatively impacted EBITDA growth by -€71 million.
    • EBITDA benefited from continued cost reduction efforts in the amount of €245 million in 2016, exceeding the initial objective of €200 million, and more than offsetting the net effect of price net of cost inflation of -€76 million, the negative impact of French Water renegotiations of -€31 million and diverse non-recurring items of -€46 million.
    • By segment: France EBITDA amounted to €751 million, down 8.1%. French Water EBITDA was lower due to the combined impact of lower water volumes, very weak price indexation and the impact of contract renegotiations, while French Waste EBITDA also declined given an unfavorable comparison base in 2015 and the decline in scrap metal prices. At constant exchange rates, EBITDA in the Europe excluding France segment grew significantly (+9.1% to €1,160 million) due to improvement in all geographies.  EBITDA in the Rest of the World segment also grew substantially (+10% at constant exchange rates) due to good performance in Asia, Latin America and the consolidation of the sulfuric acid regeneration activity in the United States. Global Businesses EBITDA also recorded strong improvement at constant exchange rates (+17.5%) due to the improvement in results in engineering businesses and good growth in hazardous waste.   
       
  • Current EBIT grew 5.2% at current consolidation scope and exchange rates (+8.5% at constant exchange rates) from €1,315 million in 2015 to €1,384 million in 2016.
  • Exchange rate movements negatively impacted current EBIT by -€44 million.
  • Current EBIT mainly benefited from solid EBITDA growth
  • The contribution of the share of net income of joint ventures and associates amounted to €94 million in 2016 compared with €99 million in 2015.

     
  • Strong growth in current net income - Group share (+5.1% at current consolidation scope and exchange rates, +10.8% at constant exchange rates) to €610 million compared with €580 million in 2015.
  • Excluding net financial capital gains, current net income – Group share increased 19.3% at constant exchange rates.
  • The cost of net financial debt declined by €22 million to -€424 million
  • Current income tax rate amounted to 25.7%
  • Non-controlling interests (current) were stable at -€109 million.
 
  • Net income – Group share amounted to €382 million in 2016 compared with €450 million in 2015. 2016 net income included restructuring charges amounting to -€163 million, non-current provisions and asset impairments, as well as the contribution from Transdev, which increased due to the divestment of 20% of Transdev by the Group.
  • Record net free cash flow of €970 million and subsequent reduction in net financial debt to €7,811 million at December 31, 2016, compared with €8,170 million at December 31, 2015.
    • Veolia generated net free cash flow of €970 million in 2016, following €856 million in 2015, due to higher EBITDA, continued capex discipline (industrial capex amounted to €1,485 million, stable compared to 2015), and another year of significantly reduced (by €270 million) operating working capital requirements.
    • Net financial debt at December 31, 2016 amounted to €7,811 million, down €359 million compared with December 31, 2015.  It benefited from a favorable foreign exchange impact of €279 million and includes the impact of €156 million in acquisitions, net of divestitures.
    • The leverage ratio once again improved, dropping to 2.56x in 2016 compared with 2.73x in 2015.
**********
Proposal to pay a dividend of €0.80 per share, paid 100% in cash relative to the 2016 fiscal year, compared with €0.73 per share for the 2015 fiscal year. 
  • At the Annual General Shareholders Meeting to be held on April 20, 2017, Veolia’s Board of Directors will propose a dividend payment of €0.80 per share in relation to the 2016 fiscal year, payable in cash. The ex-dividend date will be April 24, 2017. The dividend payment is expected to commence on April 26, 2017.
**********
  • Outlook* 
    • 2017: A transition year
      • Resumption of revenue growth
      • Stable EBITDA, or moderate EBITDA growth
      • Increased efforts to reduce costs: more than €250 million in cost savings
    • 2018
      • Continuation of revenue growth
      • Resumption of more sustained EBITDA growth
      • More than €300 million in cost savings
    • 2019
      • Continuation of revenue growth and full impact of cost savings
      • EBITDA between €3.3bn and €3.5bn** (excluding IFRIC 12)
         
* At constant exchange rates
** Equivalent to €3.4bn to €3.6bn (excluding IFRIC 12) and before taking into account the unfavorable exchange rate impacts recorded in 2016


 
**********
[1] Excluding representation related to IFRIC 12 fixed payments
[2] At constant exchange rates
At current consolidation scope and exchange rates: Revenue declined 2.3% and was stable (+0.1%) in the 4th quarter. EBITDA increased 2.0%, current EBIT increased 5.2% and current net income-Group share increased 5.1%.  Excluding net financial capital gains current net income increased 13.2%.
[3] At constant exchange rates
[4] Equivalent to €3.4bn to €3.6bn (excluding IFRIC 12) and before taking into account the unfavorable exchange rate impacts recorded in 2016

 
Definitions of all financial indicators used in this press release can be found at the end of this document.

Veolia group is the global leader in optimized resource management. With over 174,000 employees worldwide, the Group designs and provides water, waste and energy management solutions that 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 2015, the group Veolia supplied 100 million people with drinking water and 63 million people with wastewater service, produced 63 million megawatt hours of energy and converted 42.9 million metric tons of waste into new materials and energy. Veolia Environnement (listed on Paris Euronext: VIE) recorded consolidated revenue of €25.0 billion in 2015. 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.  

 

Contats 

Group Media Relations
Laurent Obadia
Sandrine Guendoul
Tél : + 33 (0)1 85 57 42 16
sandrine.guendoul@veolia.com

Investor & Analyst Relations
Ronald Wasylec - Ariane de Lamaze 
Tel. : + 33 (0)1 85 57 84 76 / 84 80
Terri Anne Powers (USA) 
Tel. : + 1 630 218 1627