Veolia posts profit slump, cashflow slide

PARIS - French international utility group Veolia Environnement on Thursday posted another steep fall in 2009 half-year net profits, with rising debts despite refinancing and restructuring, and its shares tumbled.

By (AFP)

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Published: Thu 6 Aug 2009, 6:23 PM

Last updated: Thu 2 Apr 2015, 3:43 AM

Net earnings plunged by 56 percent to 220 million euros (317 million dollars) from 501 million euros in the first half of 2008 on sales of 17.427 billion euros.

The sale outcome was narrowly up on constant exchange rates, and down 0.8 percent on current rates.

Despite increased cost-cutting and completion of a 2.0-billion-euro bond refinancing in the first half of 2009, Veolia’s debts moved up by 300 million euros to 16.828 billion euros.

The company has said it plans strategic divestments and is negotiating a tie-up with French public transport operator Transdev.

Shares in the company fell by 7.43 percent to 22.54 euros in late-morning trading, the heaviest drop on a market up 0.78 percent overall, with analysts CM-CIS saying operating results were below expectations on all fronts.

‘The company has taken a number of vigorous measures to improve its cash generation, an area in which we have already recorded the first effects,’ said chairman and chief executive Henri Proglio in issuing the results.

The group, which has interests in water, waste management, energy and transportation, achieved efficiency cost reductions of 146 million euros.

Its waste management division suffered the worst amid the global economic slowdown, with weak exchange rates, write-downs on assets and re-evaluations of others to be sold all hitting the bottom line.

Operating cash flow of 1.978 billion on consolidated revenue of 17.427 billion euros was down 4.9 percent at constant exchange rates and 7.1 percent at current rates, and the group said in its statement.

‘In the current economic environment, Veolia Environnement’s priority for 2009 is to generate positive free cash flow after the payment of the dividend,’ it said.

‘To attain this objective, the group expects net investments of no more than 2.0 billion euros in 2009, including an asset disposal plan, confirmed at June 30, 2009, of 1.0 billion euros for fiscal year 2009.’

Free cash flow is a measure of the positive difference between the rate at which money flows into the company and at which it is committed.

Group financial director Henri Piquemal told a conference call that the new entity fused with Transdev aims to list on the stock exchange ‘as soon as market conditions allow, which could come before the end of 2010.’

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