"We will accentuate our lead in environmental businesses through disciplined expenditure, creative growth actions and operational excellence."
Our savings have outstripped the target we had set, proving both the credibility of our cost-cutting plan and the quality of its implementation. Additionally, we have made good headway in rebalancing our contract portfolio, as industry now accounts for 45% of our business while local government authorities account for 55%. Virtually unchanged, only our revenue is below our expectations, but this is attributable to the unfavorable economic climate. Nonetheless, revenue did improve significantly in the fourth quarter of 2016, by 1.9% at constant exchange rates.
We recorded numerous successes throughout 2016, in both our longstanding markets and those that we have developed more recently. They include industrial water treatment for Sinopec, China’s leading oil group, with a 25-year contract worth a cumulative €3.3 billion in revenue; the £1 billion, 30-year contract to operate waste recycling centers for Hampshire County Council in the United Kingdom; the extension for 10 years of our wastewater partnership with the city of Milwaukee, United States, worth $500 million; the largest energy refit project in the Middle East, in Dubai, with Etihad ESCO; management of the left bank district heating network in Prague, Czech Republic; and, in France, the construction and operation for 25 years of an energy recovery facility in the Aube department. What do these various successes have in common?
They all show that our strategic positioning is right and demonstrate our commercial vitality, the competitiveness of our service offerings and the attractiveness of our expertise. They will bolster our revenue in the months and years ahead, especially since many of these contracts have been signed in the world’s most vigorous regions and will enable us to share in their growth.
"Our savings have outstripped the target we had set, proving both the credibility of our cost-cutting plan and the quality of its implementation."
New areas of expertises
In addition to our commercial efforts, we made several targeted acquisitions. They will consolidate our presence in high-potential sectors or broaden the scope of our expertise. Two of these transactions are of particular interest: the takeover of Chemours’ Sulfur Products division in the United States, which extends our know-how in recycling and regeneration, a key link in the energy transition chain; and the acquisition of Kurion, which provides Veolia with a comprehensive suite of expertise for the treatment of low- or very low-level radioactive waste and nuclear cleanup activities. These acquisitions help us build unparalleled clusters of expertise, which will eventually provide us with new areas of growth for our company. Now as in the past, Veolia is expanding and reinventing its businesses, placing itself at the very source of future growth.
Our focus on growth aims to amplify our organic expansion, following on from the upturn identified at the end of 2016. Our healthy reservoir of projects in the pipeline – along with the contracts signed in 2016 but not yet fully reflected in our results – provide us with solid hope for year-on-year revenue growth.
We laid good groundwork for future growth in 2016. In 2017, we will already see the payback from this work and we will continue to build on these foundations in preparing for the following years. To this end, we will be strengthening our salesforce.
With regard to efficiency, we will continue to implement our operational performance improvement and cost-containment programs to finance our growth and protect our profitability. To offset the increasingly unpredictable economic environment, we have decided to raise our cost savings target from €600 million to €800 million overthree years, of which €250 million in 2017.
We will accentuate our lead in environmental businesses through disciplined expenditure, creative growth actions and operational excellence.
The digital revolution is delivering a step change in the potential for our company’s action. Our innovation teams are highly active in this area, and their work is reflected in proposals for differentiating services with high value added.
Last year, we opened Vig’iléo, the control center for the Greater Lille (France) water supply system. All data from our facilities and distribution network is fed to this center in real time, which enables us to improve the network performance and ensure greater water supply security. This innovation – now included in several other contracts in France and other countries – represents a quantum leap in the day-to-day operation of large urban services, while also improving their resilience in the event of a crisis.
In 2016, we opened two new Hubgrade platforms in Madrid and Aubervilliers, near Paris. Our 15 energy-efficiency centers use a digital network and expert systems to operate several thousand facilities remotely and in real time.
For buildings, these “hypervision” platforms can deliver significant energy savings that benefit municipalities, businesses and residents. A global company the size of Veolia provides each local government authority or industrial concern, wherever they are located, with the opportunity to benefit from the most recent advances from research. For Veolia, it is an additional advantage when confronting international competition and a way of creating and capturing value.
"Building on the areas of excellence we have developed over the years, we now intend to derive maximum benefit from the links between the water, waste and energy markets to take our company into the future with an even greater degree of vigor."
We are in the vanguard of businesses that are preparing the world to come: we know how to make the economy circular, we know how to replace carbon-based energy with renewables, we know how to treat even the most highly polluted effluent, and more.
But what will really pay off for us in the future is the synergy between our three areas of business: water, energy and waste. It is at the crossroads between the three that the greatest source of growth will be found. We use waste to produce secondary raw materials, biofuels, biogas and fertilizer. We use wastewater to produce clean water, bioplastics, heat and electricity.
In other words, our solutions transform something that is a nuisance – municipal or industrial pollution – into something useful. Inventing economic models that “recycle everything and waste nothing” is one of the priority areas of our research.
Building on the areas of excellence we have developed over the years, we now intend to derive maximum benefit from the links between the water, waste and energy markets to take our company into the future with an even greater degree of vigor.
Medium term outlook (1)
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 €3.3 billion and €3.5 billion(2) (excluding IFRIC 12).
(1) At constant exchange rates.
(2) Equivalent to €3.4 billion to €3.6 billion (excluding IFRIC 12) and before taking into account the unfavorable exchange rate impacts recorded in 2016.