STRONG INCREASE IN 2015 RESULTS(1), WHICH EXCEEDED OBJECTIVES

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Press release: Paris, February 25, 2016. 2015 Annual results (240.59 KB)
  • REVENUE INCREASED 4.5% (+1.4% AT CONSTANT EXCHANGE RATES) TO €24,965 MILLION, (-0.6% AT CONSTANT SCOPE AND EXCHANGE RATES[1])
  • EBITDA GREW 11.3% (+8.1% AT CONSTANT EXCHANGE RATES) TO €2,997 MILLION (+5.3% AT CONSTANT SCOPE AND EXCHANGE RATES2)
  • CURRENT EBIT INCREASED 25.5% (+20.3% AT CONSTANT EXCHANGE RATES) TO €1,315 MILLION (+18.6% AT CONSTANT SCOPE AND EXCHANGE RATES2)
  • CURRENT NET INCOME IMPROVED BY 74% TO €580 MILLION
  • SIGNIFICANT INCREASE IN NET FREE CASH FLOW TO €856 MILLION VERSUS PRO FORMA €314 MILLION IN 2014
  •  NET FINANCIAL DEBT DECLINED TO €8,170 MILLION, RESULTING IN A LEVERAGE RATIO OF 2.7x.
  •  PROPOSAL TO INCREASE THE DIVIDEND FOR THE 2015 FISCAL YEAR TO €0.73 PER SHARE, PAID IN CASH.

     

2016 OUTLOOK: CONTINUED GROWTH IN CURRENT NET INCOME IN LINE WITH THE 2016-2018 PLAN

Antoine Frérot, Veolia’s Chairman & Chief Executive Officer indicated: “In a difficult economic environment, Veolia has once again demonstrated the relevance of its strategy, with results up sharply.  The performance achieved throughout the 2015 fiscal year was particularly satisfying and exceeded the objectives we set for ourselves.  The Group’s margins substantially improved in 2015, current net income increased 74% and net free cash flow set a new record of €856 million. This excellent performance allows me to approach 2016 with confidence, despite an economic context that remains difficult. The Group’s prior strategy which entirely focused on results improvement now allows the Group to increase investments and therefore to grow revenue. At the end of 2015, I presented our strategic growth plan for the 2016-2018 period.  With a focus on profitable and sustainable growth in both our traditional markets and new industrial markets, the plan also reflects our continued optimization efforts. As a result, we target revenue of at least €27 billion and current net income of at least €800 million in 2018. The 2016 fiscal year should be in line with this trajectory.   
 

  • Revenue for the year ended December 31, 2015 increased 4.5% to €24,965 million compared to GAAP re-presented[3] €23,880 million for the year ended December 31, 2014.

On a pro forma[4] basis, revenue increased 2.3% (but was down 0.6% at constant consolidation scope and exchange rates) versus €24,408 million in 2014.  The foreign exchange impact on revenue amounted to €836 million, including €377 million related to the US dollar, €245 million related to the UK pound sterling and €81 million related to the Chinese yuan.

  • In 2015, at constant consolidation scope and exchange rates, Veolia’s revenue was stable excluding the impact of the decline in energy and raw material prices (€120 million).

Revenue was also impacted by lower construction revenue, which generates low margins, by €253 million, with the completion of the PFI construction program in the United Kingdom and the completion of certain large engineering projects in Asia and the Middle East.

  • In France, revenue declined 1.5% at constant consolidation scope, but the Y-Y trend continued to improve in the last quarter (Q1 -3.6%, Q2 -1.6%, Q3 -0.5%, Q4 -0.2%). Revenue in the Water business declined by 3.5% due to the impact of contract renegotiations (-€122 million), partially offset by weaker tariff indexation (+0.3% in 2015 versus +1.2% in 2014) and a 1.2% increase in volumes. Revenue in the Waste business improved by 1%, essentially due to commercial successes which offset the decline in landfill volumes.
  • Revenue in the Europe excluding France segment was down 1.2% at constant consolidation scope and exchange rates, but there again, an improvement in the Y-Y trend in Q4 was observed, with slight revenue growth (+0.2%).  Central Europe revenue increased 1.8% at constant consolidation scope and exchange rates, while revenue in the United Kingdom declined by 3.1% at constant consolidation scope and exchange rates due to the impact of lower PFI construction revenue. Excluding construction activities, revenue in the UK was stable. In Germany, revenue fell 5.1% at constant consolidation scope and exchange rates due to the decline in waste volumes and the decline prices of energy sold. 
  • The Rest of the World segment increased 3.5% at constant consolidation scope and exchange rates, with in particular good performance in Latin America (+12.8%), in China (+7.9%), the Pacific (+3.7%) and in Africa and the Middle East (+8.6%) and despite lower revenue (-4.6% at constant consolidation scope and exchange rates) in North America due to the decline in price of electricity and energy sold.
  • Global Businesses recorded a revenue decline of 3.3% at constant consolidation scope and exchange rates, with growth in hazardous waste (+2.2%) despite the unfavorable impact of the decline in recycled oil prices, while engineering activities (VWT) declined by 5.3% at constant consolidation scope and exchange rates due to the end of large contracts (Hong Kong, Az Zour North and Sadara).

By business, and at constant consolidation scope and exchange rates, Water revenue declined by 1.7% to €11,348 million, Waste revenue recorded a 0.5% improvement to €8,692 million and Energy was stable (+0.1%), at €4,925 million.
Veolia continues to rebalance its client mix, with industrial clients representing 44% of revenue at the end of 2015 versus 39% at the end of 2014.

 
  • EBITDA increased 11.3% (+8.1% at constant exchange rates) to €2,997 million compared to GAAP re-presented prior year figures.
    • On a pro forma basis, EBITDA increased 5.3% at constant consolidation scope and exchange rates from €2,762 million in 2014. The foreign exchange impact contributed about €100 million to EBITDA growth in 2015.
    • EBITDA benefitted from continued cost saving efforts, which amounted to €223 million in 2015, and allowed the Group to absorb the negative €81 million impact of renegotiations in the Water business in France and the negative €30 million impact of lower recycled raw material prices.
    • By segment: EBITDA in France amounted to €816 million, compared with €837 million in 2014. French Water fell by 6.1% due to the impact of contract renegotiations while the Waste business recorded a 6.7% improvement due to cost reductions and favorable one-time items which amounted to €20 million. At constant consolidation scope and exchange rates, the Europe excluding France segment recorded a 9.1% increase in EBITDA to €1,104 million due to good performance in the United Kingdom and Central Europe.  The Rest of the World segment EBITDA increased by 3.7%.  Global Businesses EBITDA declined by 3.7%.   
 
  • Current EBIT posted strong growth of 25.5% (+20.3% at constant exchange rates) to €1,315 million in 2015.

    On a pro forma basis current EBIT increased 18.6% at constant exchange rates compared with €1,053 million in 2014. Current EBIT benefitted from a positive foreign exchange impact of €63 million.

    Current EBIT significantly improved in 2015 due to the combined impacts of:

  • The strong growth in EBITDA
  • The €62 million decline in depreciation and amortization charges at constant exchange rates, i.e by -4.4%
  • The significant improvement in the net income from joint ventures and associates of €30 million, essentially due to Chinese activities (+€31 million), and
  • The continued reversal balance of net charges to operating provisions at +€51 million in 2015 vs. +€2 million in 2014 related to provision reversals for Olivet contractual risks (+€27 million) and the removal of risks in France.

 

  • Current Net Income increased 74% from GAAP re-presented €333 million in 2014 to €580 million in 2015.

On a pro forma basis, growth in Current Net Income was 85% compared to €314 million in 2014.

  • The cost of net financial debt declined by €48 million despite the negative foreign exchange impact of €13 million.
  • The current tax rate declined to 28% compared with pro forma re-presented 36% in 2014.
  • Net income from non-controlling interests (current portion) increased slightly from pro forma €100 million to €110 million in 2015.
  • Net income attributable to shareholders of the company amounted to €450 million in 2015 compared with re-presented €242 million in 2014.

 

  • Net Free Cash Flow generation improved significantly from pro forma €314 million in 2014 to €856 million in 2015, which is an improvement of €542 million due to the strong growth in EBITDA, significant improvement in working capital requirements by year end and disciplined capital spending.
    • Industrial investment levels remain restrained and were €1,484 million in 2015 compared with pro forma €1,568 million in 2014, representing 5.9% of revenue. At constant exchange rates, gross industrial investments declined by 9%. Maintenance and contractual investments amounted to €1,217 million in 2015 compared with €1,194 million in 2014. Discretionary growth investments declined from €374 million in 2014 to €267 million in 2015, due to the arrival at maturity of the PFI construction program in the United Kingdom.
    • Improvement in the variation of WCR compared to 2014 by €177 million due to continued strict cash management procedures as well as advances in the VWT business that were not utilized.

 

  • Net financial debt declined to €8,170 million at December 31, 2015 compared with €8,311 million at the end of 2014 due to the significant increase in net free cash flow and despite a negative foreign exchange impact of €445 million.
     
    • The leverage ratio was 2.7x at the end of 2015.

 

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  • Dividend of €0.73 per share, to be paid 100% in cash in relation to the 2015 fiscal year versus €0.70 per share paid relative to the 2014 fiscal year. 
  • At the Annual General Shareholders Meeting to be held on April 21, 2016, Veolia’s Board of Directors will propose a dividend payment of €0.73 per share in relation to the 2015 fiscal year, payable in cash. The ex-dividend date will be May 2, 2016. Dividend payment is expected to commence on May 4, 2016.
  • Beginning with 2016, the Board of Directors envisions average annual dividend growth of around 10% per year.

 

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In 2016, in the context of a deflationary environment and weak economic growth, Veolia expects to achieve significant current net income growth

  • 2016 objectives* 
    • Revenue and EBITDA growth
    • Net Free Cash Flow excluding financial divestitures of at least €650 million
    • Current net income of at least €600 million

       *at constant exchange rates
 

  • Two main objectives for 2018
    • Current net income greater than €800 million
    • Net Free Cash Flow of €1 billion

 

  • 2016-2018 outlook
    • The Group expects a progressive increase in revenue growth to achieve average annual revenue growth between 2% and 3%, based on the current economic environment
    • Average annual EBITDA growth of around 5% per year
    • More than €600 million in cost savings over the period

 
 [1] Results are in process of being audited.

[2] On a pro forma a basis, i.e. excluding Dalkia France and including Dalkia International on a fully consolidated basis as of January 1, 2014. [3] 2014 figures have been re-presented for the application of the IFRIC 21 standard [4] Pro forma figures exclude Dalkia France and include Dalkia International on a fully consolidated basis as of January 1, 2014   **********  

Definitions of all financial indicators used in this press release can be found at the end of the 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 2014, the group Veolia supplied 96 million people with drinking water and 60 million people with wastewater service, produced 52 million megawatt hours of energy and converted 31 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.

 

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