Veolia Environnement(VEOEY) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q1 2021 revenue reached EUR6.807 billion, a 4% increase compared to Q1 2020, while EBITDA totaled EUR1.078 billion, up 13.6% due to operating leverage and efficiency gains [13][28] - Compared to Q1 2019, revenue grew by 2.8% at constant forex, and EBITDA increased by 7.5% at constant forex, indicating a recovery above pre-crisis levels [14] Business Line Data and Key Metrics Changes - Municipal water showed resilience, benefiting from cold winter conditions, while solid waste adapted to volatile C&I volumes, with efficiency measures and price increases driving performance [17] - Hazardous waste volumes increased, with seven new facilities under construction across various regions [18] - Onsite services for the automotive and oil and gas industries have not fully recovered but showed strong rebounds [19] Market Data and Key Metrics Changes - Revenue growth in North America is expected to increase by 50%, while Latin America is projected to double, and Australia is anticipated to grow by 60% due to the merger with Suez [9] - The UK and Spain are expected to see significant revenue growth, although overall growth in Europe is more moderate [9] Company Strategy and Development Direction - The acquisition of Suez assets aims to create a leader in ecological transformation, with expected synergies of EUR500 million and double-digit EPS accretion starting in 2022 [6][8] - The company plans to maintain a net debt to EBITDA ratio below three times post-acquisition, with financing largely through asset divestitures and a capital increase of EUR2 billion to EUR2.5 billion [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving annual targets, with expectations for revenue and EBITDA to exceed 2019 levels, targeting over EUR4 billion in EBITDA for 2021 [26][28] - The company remains optimistic about the recovery trajectory, driven by strong operational performance and efficiency measures [14][22] Other Important Information - The company achieved EUR92 million in efficiency gains in Q1, on track to meet the annual target of EUR350 million [13][22] - Free cash flow generation improved by EUR468 million compared to the previous year, with a focus on cash management and lower CapEx spending [28][43] Q&A Session Summary Question: Update on CapEx plans for the full year - The company expects CapEx of around EUR2.3 billion for the full year, focusing on discretionary spending in hazardous waste and energy transition projects [52] Question: Explanation of PFI contracts in the UK - PFI contracts provide resilience to EBITDA despite lower volumes, as the company shares volume and price effects with customers [54][56] Question: Potential market size in Japan post-merger - Japan is seen as a significant growth area, with current turnover exceeding EUR600 million, and the company aims to expand its presence in water and waste services [57] Question: Air quality service offerings - There is increasing awareness among public authorities regarding air quality, leading to more tenders for air quality services, particularly in schools and public spaces [58] Question: Details on operational efficiencies contributing to EBITDA - Operational efficiencies include improved performance in hazardous waste and incineration activities, contributing positively to EBITDA despite volume declines [104]