Profits at Luas owner Veolia fall 29% to €251m

Veolia’s first-half net profit fell 29 per cent to €251 million on French restructuring costs but the water and waste group expects a string of international acquisitions will boost second-half revenue.

Veolia CEO Antoine Frerot said the firm would see the benefit in the second half of a string of international deals which would add more than €500 million of annual revenue. Frerot said a Prague heating network contract would yield yearly revenue of about €50 million, a Sao Paulo landfill about €30 million and a water treatment contract with China's Sinopec €130 million a year.

Five big deals

In the first half Veolia also bought US radioactive waste specialist Kurion, with revenue of about €100 million, and the sulphur recycling unit of Chemours, with revenue of about $280 million (€251 million). “Those five big deals have contributed little to first-half revenue, but will contribute fully to the second half, which should see significantly better growth,” Frerot said. He also said the new acquisitions’ profitability is above group average.

Veolia shares rose 3.4 per cent in early trade as it said it would easily meet guidance for current net income of at least €600 million in 2016, and confirmed its outlook for current net of €800 million in 2018.

Brexit

Veolia said Britain’s planned EU exit would have little impact on its business in the UK, where it earns annual revenue of about £2 billion. “Production costs and sales are in the same currency, so we are not getting squeezed,” Frerot said. Even if a potential British recession reduced household waste production, industrial waste should not be affected as a lower pound would make exports more attractive. Frerot said business remains difficult in France, where the firm booked €63 million in charges for voluntary redundancies in its water business, but he does not expect further restructuring there. Because of low inflation, French water tariffs are not increasing, but Veolia’s costs do. It has also been hit by water contract renegotiations, low energy prices and low scrap metal prices. Core French earnings fell 10.7 per cent to €353 million.

Veolia expects to book significant capital gains on its Transdev unit, which operates Dublin's Luas, and which is valued at €460 million in its accounts and will be sold to CDC bank for €550 million. First-half revenue fell 2.9 per cent to €11.96 billion while core earnings rose 3.2 per cent to €1.58 billion.

– Reuters