The strategy pay off

Antoine Frérot, Chairman and Chief Executive Officer of Veolia

> Veolia launched its transformation plan three years ago. What progress was made in 2014
Over the year, we saw rapid advances in our transformation plan along with significant progress in regaining Veolia’s capacity to maintain profitable and sustainable growth. There were numerous high points in the year. They include substantial commercial successes with industrial and municipal clients alike in both emerging and mature economies, such as Germany, England and France. And also the consolidation of our new organization, which is starting to pay off as evidenced in the smoother flow of information, simplified operation and greater responsiveness. The full integration of Dalkia’s international business now gives us complete control over the management of energy services, which is a crucial activity in tomorrow’s environmental sector.  Our Veolia brand has been simplified and we have adopted a new signature, “Resourcing the world,” which embodies the fact that resources permeate every aspect of our business. And to crown it all, our 2014 results outperformed the targets we had set ourselves.

> More generally, what is your overall view of the transformation plan since it was introduced in early 2012?
Three years is a short period in the life of a company that is over 150 years old.  And yet, what a long way we have come in that time. Our transformation plan has enabled us to improve our collective efficiency. We have found new commercial momentum. We have undertaken a major organizational change and we are back on the road to profitability. On top of all that, we have developed fields of excellence that place us in the vanguard of environmental business activities, which are so crucial for the future. These are all decisive assets for our future competitiveness. The decision to transform Veolia, as audacious as it was, was carefully thought through and is now paying off. Our company is now firmly on track and heading toward selective, profitable growth, while strengthening its leadership position in businesses with excellent prospects. I would just like to add that if we are the worldwide leader in environmental solutions, it is not just because our revenue is the highest; it is also because we approach this business differently. We have positioned ourselves differently—for example, with a single offer spanning water, waste and energy—and we innovate continuously to make sure we stay in the lead and stand out. We decided to bank on differentiation and that decision has clearly worked for Veolia.
 

“The decision to transform Veolia, as audacious as it was,
was carefully thought through and is now paying off.”

 

> How are these changes reflected in your company’s financial performance?
All our financial indicators  were up last year, reflecting our company’s solid performance. Our revenue was up 4.9% to €23.8 billion on the back of strong growth in the United States, Asia-Pacific and the Middle East, and in our global business activities. Our adjusted operating cash flow broke through the €2 billion barrier and our adjusted operating income topped €1 billion. Our cumulative cost savings came to €582 million, putting us ahead of target. In other words—and this is the crux in my view—our company is now delivering tangible results on the past few years’ efforts. And that’s further proof, were it needed, of just how successful its transformation has been.

 

Progression of financial indicators

Revenue + 4.9%

€ 23.8 billion turnover

> What are your growth priorities?
The triple thrust of our strategy defines our priorities: target large-scale environmental markets, boost our business with industrial clients, and concentrate on the most dynamic geographic regions. For municipalities, we are focusing on three market segments: the operation of public services where there is a need for high investment; operation alone without any significant investment (a segment that also includes innovative solutions to optimize urban services); and engineering and construction. At the same time, we have identified six broad industry growth sectors on which we will concentrate our resources because they provide the potential for rapid expansion and high margins. These are oil and gas, mining, agri-business, dismantling operations, the circular economy, and difficult-to-treat pollution. The major contracts we signed last year amount to provisional revenue of €9 billion and will step up our repositioning in these high-potential sectors. Today, our company is ideally placed to seize future growth opportunities as they arise. We have identified 300 to 400 highly profitable projects that will come on stream in the next few years and which are liable to grow our revenue by at least 3% a year by 2018.
 

In Bordeaux in France, Veolia is dismantling big ships and reusing the materials from them.

> Veolia is taking a strong stance to promote the circular economy. Why is that? 
The simple answer is the increasing scarcity of raw materials, water and energy. Today’s world is living off ecological credit. We can turn this situation around by making more use of the circular economy  in which the waste of some systematically becomes a resource for others. Our company provides top-level expertise to overcome the logjam between the growing scarcity of raw materials and increasing needs.

Our solutions turn wastewater into bioplastics, waste cooking oil into biofuel, scrap metal into secondary raw materials, organic waste into fertilizer, heat or electricity, and so forth. By giving value to something that was seen as worthless, we secure supplies for industry and municipalities, reduce their expenses and create new revenue streams.

The circular economy accounts for 10% of our revenue and it is set to grow. This business is and will increasingly be one of our main growth drivers.

> The 21st United Nations Climate Change Conference (COP21)  will be held in Paris at the end of 2015. What is Veolia doing in this field? Actions designed to meet the growing demand for energy while simultaneously reducing CO2 emissions are central to the partnerships with our clients. As the leader for waste recovery, the precursor for energy savings and energy efficiency, and as a specialist in renewable energies and unavoidable energy recovery, our company provides solutions for a more circular economy that can lessen the effects of climate change and help communities to adapt. To speed up the large-scale application of such solutions, we are in favor of putting a price on carbon, insofar as an adequate and predictable price is set per metric ton.   The words “greenhouse gas” usually evoke carbon dioxide in people’s minds. But there are other short-lived climate pollutants, , such as methane. For the very long term, capturing and recovering CO2 seems inevitable if we are to stabilize the amount of carbon accumulated in the Earth’s atmosphere.

> What are the medium-term prospects for Veolia? Now that we’re refocused on the most profitable sectors, our company can boast an extremely promising outlook. For 2015, the last year in our transformation plan, we have set ourselves the targets of consolidating our performance, financial in particular, and completing our company’s reinvention. Beyond that, we are preparing a three-year growth plan for the years 2016 to 2018. With the refocusing and transformation of our company completed, the plan will concentrate on organic growth (together with a few highly targeted acquisitions), and on improving our operational efficiency. Our aim is simple: to capture the finest and most profitable growth opportunities.
 

“ Our aim is simple: to capture the finest and most profitable growth opportunities.”

 

In Joure in the Netherlands, Veolia is generating energy from coffee grounds to power a factory and reduce its carbon footprint.
In Milwaukee in the USA, where Veolia manages the city’s sewage system, we are producing fertiliser from dried wastewater sludge.
In Singapore, Veolia uses closed-loop recycling to manage the exceptionally pure water on a large microelectronic industrial site.