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Veolia Nine-Month Revenue Rises Y/Y - Analyst Blog
11/8/2012 4:00:00 PM
Veolia Environnement ( VE ) registered 3.3% growth in its top line in the first nine months of 2012, stemming from higher contribution from its Water, Energy Services and Other segments. However, its Enviornmental Services segment was a marginal offset.
Total revenue in the first nine months of 2012 was €21.59 billion ($27.67 billion), up from €20.91 billion ($29.43 billion) reported in the comparable period last year.
The year-over-year growth was attributable to favorable summer weather, leading to an increase in the demand for water.
Water : Revenue from this segment in the first nine months of 2012 was €9.20 billion ($11.78 billion) improving 2.9% from €8.95 billion ($12.6 billion) in the same period, last year. The higher tariffs rate in Central and Eastern Europe and favorable indexation effects in France boosted the performance of this segment.
Enviornmental Services : Revenue from this segment in the first nine months of 2012 was €6.75 billion ($8.6 billion) falling 0.8% from €6.8 billion ($9.6 billion) a year ago. The marginal dip was due to the decline in recycled raw material prices besides discontinuation and restructuring of some operations in North Africa and Italy.
Energy Service s: Revenue generated in the first nine months of 2012 was €5.2 billion ($6.7 billion) increasing 8.5% from €4.8 billion ($6.7 billion) in the year-ago period. The uptrend was attributable to higher energy prices.
Others : Revenue from this segment grew 21.2% to €0.45 billion ($0.58 billion) in the first nine months of 2012, driven by ProActiva MedioAmbiente growth
The company has begun to realize cost saves. Its efficiency and convergence plan has resulted in cost savings of €154 million ($197 million) in the first nine months of 2012.
Despite cost savings, adjusted operating income in the first nine months of 2012 declined 24.8% to €0.9 billion ($1.2 billion) from €1.1 billion ($1.5 billion) in the comparable period of 2011.
Net financial debt of the company as of September 30, 2012 was €15.2 billion ($19.54 billion) increasing by €0.3 billion from €14.73 billion ($19.07 billion) at year-end 2011.
Veolia Environnement provided a combined outlook for 2012 and 2013. The company has decided to sell assets worth €5 billion and bring the net financial debt level to €12 billion within the next two financial years.
The company also provided a business outlook beyond 2013. The company forecasts organic revenue growth of 3% per year from 2013, while adjusted operating cash flow is expected to be over 5% per annum. The company has also taken the initiative to reduce costs and aims for a gross reduction of €500 million in 2015.
The company has presently undertaken many initiatives, including the appointment of a Chief Operating Officer effective December 1, 2012. Veolia has already started to derive some benefits from these initiatives, but we feel it still needs to go a long way to realize its goal and share the positives with its customers and shareholders.
Veolia Environnement currently retains a short-term Zacks #3 Rank (Hold rating). Presently, we prefer its peers Connecticut Water Service Inc. ( CTWS ) and American States Water Company ( AWR ) which hold a short-term Zacks #2 Rank (Buy rating).
Based in France, Veolia Environnement is a provider of environmental management services to its worldwide consumers. It operates through four segments, namely, Water, Environmental Services, Energy Services and Others.
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