Veolia Environnement(VEOEY) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased by 5% over the first nine months of 2019, with Q3 benefiting from good water and waste volumes [4][5] - EBITDA grew by 5.1%, while EBIT progressed by 5.5% over the nine months, and current net income rose by 7.5% to €486 million [5][11] - Net debt remained stable at €12.5 billion despite €230 million of financial investment in Q3 [11][23] Business Line Data and Key Metrics Changes - Water revenue in France showed a 2.7% increase over nine months, while waste activities experienced a slight decline due to contracted activity and low recycled paper prices [5][12] - Waste activities grew by 7.1%, driven by volume increases and price indexation across various geographies [15][19] - The international segment saw a 9% revenue growth in Q3, with strong performance in Asia and Latin America [12][20] Market Data and Key Metrics Changes - France's revenue growth was 2.7%, while the Rest of Europe grew by 5.3%, with Central Europe at 6% and the U.K. at 4.5% [5][12] - The Rest of the World experienced an 8.2% revenue increase, with Asia growing by 12% and Latin America by 21% [5][20] - The U.K. and Southern Europe showed double-digit growth, particularly in waste activities [19] Company Strategy and Development Direction - The company focuses on high-potential and fast-growing activities while downsizing competitive or low-margin businesses [6][7] - The strategy emphasizes strong organic growth and cost efficiency, with €185 million in cost savings achieved over nine months [8][9] - A new strategic program for 2020-2023 is being prepared, to be presented in February 2020 [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining profitability despite challenges in revenue growth, particularly in France [30][31] - The company aims to increase profitability by focusing on high-margin activities and reducing exposure to low-margin municipal collection [32][56] - Management noted ongoing competitive pressures, particularly in construction and municipal waste collection, while highlighting opportunities in specialized waste and recycling [54][56] Other Important Information - The company expects net debt to be around €11 billion by year-end, factoring in asset disposals and acquisitions [24] - Significant improvements in free cash flow were noted, with €300 million better than Q2 and €100 million better than Q3 last year [23] Q&A Session Summary Question: Regarding lower works from Global Businesses and waste volume - Management confirmed that the selective policy in construction and waste activities is intentional, focusing on higher-value contracts [26][27] Question: Trends in France's revenue growth - Management indicated that the trend in French Water will remain stable, with no major changes expected in waste activities [30][31] Question: Reasons for EBITDA decline in waste activities - The decline is attributed to selectivity in revenue and a negative impact from recyclate prices [37] Question: Pricing pressure on EBITDA - Management explained that pricing pressure arises from labor cost increases and competitive pressures, necessitating efficiency gains [41][42] Question: Investment in plastic treatment capacity - Management confirmed ongoing investments in high-quality plastic recycling activities [47] Question: Maintenance CapEx increase - The increase in maintenance CapEx was due to the phasing of maintenance equipment, not a significant concern [49] Question: Competitive environment and plant utilization - Management noted varying competition levels across segments, with some areas facing increased pressure while others remain less competitive [52][56] Question: Future strategic plan focus - Management indicated that the upcoming strategic plan will build on lessons learned and market opportunities identified [59] Question: Sustainability of cost-cutting measures - Management affirmed that cost-cutting is now part of the company's DNA and will continue to be a key element of the business model [60][61] Question: Asset rotations - Management acknowledged the potential for asset rotations to focus on more profitable businesses, although not driven by immediate deleveraging needs [62]