Veolia Environnement(VEOEY) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue in H1 2020 decreased by 5.6% at constant scope and exchange rate, amounting to a decline of €912 million, with only a €88 million drop in June [6][32] - EBITDA fell by 17% in H1, a decrease of €403 million, but only €27 million in June [6][32] - Current net income for H1 was €7 million, indicating a significant drop compared to previous periods [6][32] - Free cash flow decreased by only €40 million compared to H1 2019, and net financial debt was reduced by €600 million to €11.8 billion [7][60] Business Line Data and Key Metrics Changes - Municipal water activities showed resilience with stable volumes, while construction activities were heavily impacted by lockdowns but rebounded strongly in June [17][18] - Solid waste collection faced significant declines in commercial and industrial waste but recovered rapidly, with France and Germany returning to 100% activity levels by June [19][20] - Hazardous waste revenue was down by only 3.5% in H1, with EBITDA margins maintained above 15% [21][24] Market Data and Key Metrics Changes - Japan experienced an 8.8% revenue growth due to strong municipal water business, while other regions like the U.S. saw a slight decline of 1.6% [16] - France was the hardest hit market due to strict lockdowns but showed a vigorous rebound in June [16] - Overall, the rest of Europe, Africa, and the Middle East experienced slight revenue declines between 1% and 2% [16] Company Strategy and Development Direction - The company aims to recover its 2019 operational performance by Q4 2020, contingent on the absence of a second COVID wave [27][28] - The "Impact 2023" strategic program remains relevant, focusing on ecological transformation and benefiting from stimulus packages in various geographies [28][29] - The company plans to maintain development CapEx to support growth in the coming years, despite reducing overall CapEx by €500 million in 2020 [10][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovering operational performance by Q4 2020, with a strong rebound in June [27][28] - The adaptation plan has generated €120 million in savings, allowing for an increase in the savings target for 2020 from €200 million to €250 million [9][23] - Management acknowledged the ongoing ecological emergency and the importance of maintaining strategic initiatives despite the pandemic [28][29] Other Important Information - The company has a strong liquidity position with €7.9 billion in cash available, ensuring no liquidity issues [61] - The adaptation plan includes both one-off initiatives and sustainable measures, with an estimated one-third of savings expected to be recurring [24][26] Q&A Session Summary Question: What are the assumptions regarding the year-end performance? - Management anticipates a few percent points of activity may still be missing at year-end but aims to compensate through cost-cutting and new projects [66][69] Question: What is the expected impact of COVID-related losses in Q3? - Anticipated COVID-related losses for Q3 are expected to be a couple of dozen million per month, similar to June [73][75] Question: How is the working capital expected to evolve in the second half? - Management expects a reversal of working capital at the end of the year, consistent with past trends [88] Question: What is the outlook for M&A activity? - The company plans to continue its tuck-in acquisition strategy, leveraging its strong cash position [105][107] Question: How comfortable is management with the consensus EBITDA forecast? - Management finds the consensus of €3.6 billion EBITDA for the full year to be reasonable [93][97]