2014 First Half Results - Veolia · Next and final step Transdev / SNCM A more focused Company with...

2014 First Half Results

August 28, 2014

Veolia Environnement is a corporation listed on the NYSE and Euronext Paris. This document contains "forward-looking statements" within the meaning of the provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including but not limited to: the risk of suffering reduced profits or losses as a result of intense competition, the risks associated with conducting business in some countries outside of Western Europe, the United States and Canada, the risk that changes in energy prices and taxes may reduce Veolia Environnement's profits, the risk that we may make investments in projects without being able to obtain the required approvals for the project, the risk that governmental authorities could terminate or modify some of Veolia Environnement's contracts, the risk that our long-term contracts may limit our capacity to quickly and effectively react to general economic changes affecting our performance under those contracts, the risk that acquisitions may not provide the benefits that Veolia Environnement hopes to achieve, the risk that Veolia Environnement's compliance with environmental laws may become more costly in the future, the risk that currency exchange rate fluctuations may negatively affect Veolia Environnement's financial results and the price of its shares, the risk that Veolia Environnement may incur environmental liability in connection with its past, present and future operations, as well as the risks described in the documents Veolia Environnement has filed with the U.S. Securities and Exchange Commission. Veolia Environnement does not undertake, nor does it have, any obligation to provide updates or to revise any forward-looking statements. Investors and security holders may obtain a free copy of documents filed by Veolia Environnement with the U.S. Securities and Exchange Commission from Veolia Environnement.

This document contains "non-GAAP financial measures" within the meaning of Regulation G adopted by the U.S. Securities and Exchange Commission under the U.S. Sarbanes-Oxley Act of 2002. These "non-GAAP financial measures" are being communicated and made public in accordance with the exemption provided by Rule 100(c) of Regulation G

Unaudited figures

Disclaimer

2VEOLIA KEY FIGURES AS OF JUNE 30, 2014

HighlightsAntoine Frérot, CEO

2014 first half results


Good revenue performance, up 3.0% at constant FX to €11,232MWater and Waste activities: up 6.5% at constant exchange rates and +3.6% at constantscope & FX

Adjusted operating cash flow of €1,009M, up 9.9% at constant exchangerates

Excluding headquarters cash restructuring costs (-€32M in 2Q2013 vs. -€22M in2Q2014), adjusted operating cash flow increased 8.3% at constant FXWater and Waste activities: up 13.9% at constant FX (versus +9.6% in Q1)

Back to growth due to solid strategic execution

4

Good momentum in the UK, US and Australia (mainly Waste), as well as in CentralEurope (Water)

Rebound in France performance, mainly due to cost cutting Negative impact of weather in Dalkia, predominantly in Q1

VEOLIA KEY FIGURES AS OF JUNE 30, 2014

Significant improvement in 2nd quarter results

5

o Revenue: up 3.1% at constant scope & FX in Q2, vs. -1.7% in Q1o Water: Stable Operations revenue and strong rebound in Technologies and Networks

(+20.1% à constant scope & FX in Q2) due to the ramp up of large projects, mainly in the Middle East

o Waste: confirmed return to more favorable dynamics (mainly UK and Australia)o Energy Services: Negative weather impact mainly in Q1

o Adjusted operating cash flow: significant improvement in Q2, up 20.5% at constant exchange rates, vs. +2.3% in Q1, due to internal management efforts and ramp in cost savingso Water and Waste: up 13.9% in H1, (+9.6% in Q1, and +18.7% in Q2) mainly due to cost

cutting in Franceo Dalkia France: negative weather impact predominantly in Q1, less in Q2o Restructuring costs: -€32M in H1 2013 and -€22M in H1 2014


Cost savings: continued execution of the plan

6

o €104M in gross savings in H1 2014 €32M in implementation costs €72M in net savings(1)

Impact onOperating Incomebefore IFRS 10 & 11 (in €M)

H12012

H2 2012

H1 2013

H2 2013

H1 2014

Cumulative June-end

2014

Cumulative 2014-endObjective

Gross savings 59 83 110 98 104 454 550

39%

25%

17%

19%Water

Waste

EnergyServices

Holding

19%

48%

8%

14%4%

5% 2%

Purchasing

OrganizationalefficiencyAddressing loss makingcontractsTechnical optimization

IT

Reduction of externalexpensesOther

(1) Contribution post IFRS 10 &11: €63MVEOLIA KEY FIGURES AS OF JUNE 30, 2014

Dalkia International now fully owned starting July 25, 2014Operational integration of BUs in each country already doneHigher expected synergiesPositive impact on net financial debt

Proactiva fully owned since November 2013

Buy back of minorities in Central Europe water operations

Exit of joint ventures where Veolia didn’t have full controlBerlin waterMarius Pedersen

Next and final stepTransdev / SNCM

A more focused Company with the majority of businesses now fully controlled


Continuing organic growth (1/2)

8

Santiago du ChiliWaste collection(€40M, 8 years)

Buenos Aires, ArgentinaWaste collection(€500M, 10 years)

SingaporeUrban waste

(€138M, 6 years)

Basra, IraqDesalination, $115M, 5 years


The company’s traditional markets are changing: • Most attractive concessions financed by the company• Other interesting concessions financed by partners• Pure operation or construction contracts - no investment by Veolia

Grand Lyon: water services€660M, 8 years

Japon, HakoneWater services(€14M, 5 years)

Brent Council UKWaste services(£ 142M, 9 years)

Az Zour North, KuwaitConstruction desalination plant

€320M

Nantes MetropoleDrinking water plant (€656M, group share)

Hunter Water, AustraliaO&M , water treatment

plants: €193M

Continuing organic growth (2/2)

9

The company’s key growth markets in environmental services:

• 2014 external growth limited to further building know how• Net financial debt to stabilize around €8 billion at year end 2014

Merrit & Ft Saint JamesOperation 2 biomass plants(€1.1bn, 30 years)

• Oil & gas• Creative solutions for cities• Dismantling

• Circular economy• Hazardous pollution

Shell Carmon CreekWater treatment plant

BP, Oman Oil & Gas($75M)

DC WaterWashington

($12M)

Ecopetrol AmericaOil & Gas($73M)

Dismantling (RER train cars, ships)


FPCC ‐ TaïwanOli & gas (€15M)

Novartis‐ Industrial Utilities (€925M)

UK ‐ Destruction of hazardous waste

In revenue terms, 60% of wins from new contracts, while 40% from the renewal of existing contracts→Growing markets and confirmed confidence from our

clients

60% of wins in the industrial sector→Veolia is already well positioned to benefit from

growth in the industrial sector and is progressing toward the communicated portfolio rebalancing

40% of new revenue from awarded contractshave come from Veolia’s key strategic growth areas

Execution of the Company’s strategy is driving commercial successes

10

Newcontracts

70%

Contractrenewals

30%

Industrial

Municipal

18%

50%

10%

H1 2014 Revenue Gains


30%

40%

60%

60%%40%

60%

Traditionalmodel

40%

Key growthareas

Oil and gas: a growth area where Veolia is a leading player

11

A comprehensive portfolio from non-conventional upstream to downstream

solutions

Technologies

Operations expertise: a differentiating factor and an element of reliability

Global network

• Network of Global Account Managers dedicated to the Industrial sector

• More than100 installations directlyoperated

• Injection water• Produced water onshore & offshore• Process water; Waste water• Sludge management• Hazardous waste• Heating/ cooling systems• Mobiles….etc

• Global presence

• Ability to rapidly deploy resources

During the first half of 2014, significant wins throughout the entire Industrial value

chain (non-exhaustive list)

Shell Carmon CreekProduced water recycling for vapor injection – Oil Sands

BP Khazzan (Oman)Water for gas

production, Tight Gas

Refap refineryOily sludge recovery,

start of operation

Ecopetrol ColombiaProduced Water (Oil extraction)

Shell Showa JapanOily Sludge recovery

AngolaDrill cuttings from O&G extraction


FPCC TaiwanWaste water treatment and

recycling for the largestpetrochemical plant in

Taiwan

Tangshan Tangsteel Gases (LNG)

Waste water tretament and reuse, Cooling Water

ExxonMobil SingaporeWhite Oils Tank

Cleaning

The project: design, build and operation of a water treatment plant necessary to the development of the first phase of tight gas well development in Khazzan, in the Sultanate of Oman

Capacity 6,000 m3/dayInitial start up and operations for a period of up to 5 yearsTotal contract revenue around $75 million

Veolia brings unique technological expertiseOur operational know how is a key differentiating factor Local municipal presence complements industrial sector developmentFirst step in a major scale project (300 wells expected to be developed, producing more than 28 million m3 of gas per day)Positioning in non-conventional gas with one of the largest tight gas projects in an elevated stressed water environment

Oil and gas: focus on BP Khazzan


Reconfirmed 2014 objectives

13

2014 Objectives (1)

• Revenue growth

• Around 10% growth in adjusted operating cash flow at constant exchange rates

• Good operational performance to continue • Cost savings impact : ongoing execution of the plan

• Significant growth in adjusted operating income

• Reduction in financial expense

• Significant growth in adjusted net income

Continuing focus on capex management and growing cash generation

(1) At constant exchange rates


2012‐2013 :Transformation

periodObjectives achieved

• €5 billion in divestments (1)

• 2013 net financial debt under new accounting standards:o Net financial debt between €8bn and €9bn(2)o Adjusted net financial debt between €6bn and €7bn(2)

• Cost reductions:o in 2013: €170 M net cumulative impact(3)

• Extended dividend commitment of €0.70(4) per share in 2013(5) and 2014(5)

Beginning 2015

• Average organic revenue growth> 3% per year (mid‐cycle)

• Average adjusted operating cash flow growth > 5% per year (mid‐cycle)

• Leverage ratio(6) of 3.0x(7)

• Mid‐term: payout ratio in line with historic level

• Cost reductions in 2015: €750M net cumulative impact(3)

Mid-term objectives


(1) Excluding debt reduction of €1.4 billion related to the exit of the Berlin contract (2) Before closing exchange rate impact(3) Net of implementation costs, of which, due to new accounting standards for joint ventures, ~80% will benefit adjusted operating income. (4) Subject to the approval of Veolia’s Board of Directors and the Annual General Shareholders Meeting(5) In cash or shares(6) Adjusted net financial debt /(Operating cash flow before changes in working capital + OFA repayments)(7) +/‐5%

Results for the period ended June 30, 2014

Phillipe Capron, CFO

2014 first half results


2014 first half key figures

16

In €M H1 2013 re-presented(1) H1 2014

∆ constant FX

Revenue (2) 11,074 11,232 +3.0%

Revenue excluding Dalkia France 9,250 9,679 +6.5%

Adjusted operating cash flow 930 1,009 +9.9%

Adj. op. cash flow excluding Dalkia France 799 897 +13.9%

Adj. op. cash flow margin (excl. Dalkia France) 8.6% 9.3% +0.7 pp

Adjusted operating income (3) 541 564 +5.8%

Adjusted net income – Group share 134 187 +40%(4)

Gross investments 634 708 (5)

Net FCF(6) -563 -163

Net financial debt 10,031 8,646

(1) 2013 re-presented for IFRS 5 (the representation associated with IFRS 5 only applies to the income statement: see Appendix 2)(2) + 0.6% at constant scope & FX(3) Including the share of adjusted net income of joint ventures and associates of entities viewed as core Company activities (excluding Transdev, which is not viewed as a core

Company activity)(4) At current consolidation scope and exchange rates(5) Including €129M in financial investments (buyback of water minorities in the Czech Republic and Kendall purchase) versus €22M in H1 2013.(6) Net Free Cash Flow: cash flow before net financial divestments and after payment of financial expense and taxes represents the sum of adjusted operating cash flow and

operating cash flow from financing activities, dividends received from joint ventures, principal payments on operating financial assets, changes in working capital for operations and industrial investments and industrial divestitures, excluding net industrial investments of discontinued operations (and excluding the hybrid issuance in euros and pound sterling for €1,454M (including coupons paid) in January 2013.)

Results consistent with our annual guidanceSignificant improvement in adjusted operating cash flow margin

Good revenue performance: +3.6% at constant scope & FX excluding Dalkia France

17

REVENUE IN €M

2,782 2,765

2,366 2,427

1,884 2,162

2,0002,102

1,8241,552

218 224

H1 2013re‐presented (1)

H1 2014

11,074 11,232

∆ ∆ constant FX

∆ constant scope & FX

France -0.6% -0.6% -0.6%

Europe excl. France +2.6% +2.2% +2.4%

Rest of the World +14.7% +22.0% +8.0%

Global businesses +5.1% +7.2% +7.8%

Dalkia France -14.9% -14.9% -14.6%

Total +1.4% +3.0% +0.6%

Total excl. Dalkia France +4.6% +6.5% +3.6%

• Good resilience in France Water: Almost stable revenue (-1.2%) despite unfavorable contract

evolution; stable volumes, but lower price indexation (+1.3% vs. +2.6%) Waste: Stable revenue despite lower volumes and scrap metal prices in

sorting/recycling. Lower landfill volumes, but better mix. • Continued growth in Europe excluding France: UK waste, Central &

Eastern Europe • Significant growth in Rest of the World mainly Australia and the US

(waste, energy services)• Strong growth in Global businesses, (+7.8% at constant scope &

FX): hazardous waste growth (+6%), SADE (+7%, with higher backlog) and start up of large projects in VWS (Revenue +10% at constant scope & FX)

(1) See Appendix 2VEOLIA KEY FIGURES AS OF JUNE 30, 2014

Renewed growth in Water and Waste in the first half

18

REVENUE IN €M

• Water: +3.1% at constant scope & FX Stability in Operations activities: in France, flat volumes and lower price

indexation; in Central & Eastern Europe, higher prices offset lower volumes. Revenue decline in Germany (weather impact at BVAG)

Strong rebound in Technologies & Networks in Q2 (Sade, VWS)

• Waste: +2.8% at constant scope & FX: encouraging first half, similar trend as Q1

• Energy Services: Dalkia France revenue decline of 14.6% related to weather and end of gas cogeneration contracts

11,23211,074

∆ ∆ constant FX

∆ constant scope & FX

Water +2.3% +4.3% +3.1%

o/w Operations +1.0% +2.7% +0.4%

o/w Technologies & Networks +5.0% +7.7% +8.9%

Waste +4.8% +6.1% +2.8%

Energy Services -7.0% -6.5% -10.1%

Total +1.4% +3.0% +0.6%Total excluding Dalkia France +4.6% +6.5% +3.6%

(1) See Appendix 2


117 110

1,972 1,834

3,985 4,175

5,000 5,113


H1 2014

Waste dynamics confirmed

19

H1 2014

Prices and volumes of recycled materials -0.6%

Volumes/ activity levels +1.7%

Service price increases +0.8%

Other (including construction revenue) +0.9%

Currency effect -1.3%

Scope +3.3%

Raw material prices: paper prices stabilized, but continued decline in scrap metal prices and volumes

France: Stable revenue; improvement in adjusted operating cash flow due to cost cutting, in an environment that remains challenged: weak price revisions and impact of lower scrap metal volumes and prices.

UK: Revenue +11% due to ramp up and growth in PFIs (start up of Staffordshire, incinerator capacity utilization of 91.4%, higher volumes incinerated by 22%), and commercial successes

Germany: Volumes declined, but adjusted operating cash flow improved significantly due to restructuring

Hazardous waste: Continued growth (+6%)

Revenue up 2.8% at constant scope & FX Continuous trend improvement


Strong improvement in Q2 adjusted operating cash flow

20

ADJUSTED OPERATINGCASH FLOW IN €M

∆ ∆ constant FX

France +6.0% +6.0%

Europe excl. France +2.3% +2.1%

Rest of the World +37.5% +44.3%

Global businesses +0.6% +1.7%

Dalkia France -14.8% -14.8%

Total +8.5% +9.9%

Total excluding Dalkia France +12.3% +13.9%

At constant FX, adjusted operating cash flow increased 9.9% and +13.9% excluding Dalkia France

• Rebound in France due to cost cutting• Continued growth in Europe excluding France: primarily due to UK waste • Significant growth in Rest of the World, mainly in Australia (waste) and the

US (energy services), and benefit from Proactiva consolidation (€40M)• Growth in Global Businesses: mainly hazardous waste


294 311

287 293

188259

94

95129

110

‐62 ‐59


H1 2014

9301,009

Adjusted operating cash flow: improved performance in Water and Waste

21

o Water: Strong adjusted operating cash flow growth in Operations activities due to efficiency gains in France and continued positive trends outside of France

o Waste: Stable volumes in Europe, operational improvement in France and Germany, and significant growth in the UK (PFIs) and Australia

o Energy Services: Expected decline in Dalkia France (end of gas cogeneration contracts) – Weather negatively impacted France but was favorable in the US

Adjusted Operating Cash Flow constant FX

Water +2.2% +3.8%

Waste +14.8% +16.0%

Energy Services -5.4% -4.4%

Total +8.5% +9.9%

Total excluding Dalkia France +12.3% +13.9%

ADJUSTED OPERATING CASH FLOW IN €M


‐ 56 ‐ 38155 147

404 464

427436


H1 2014

930 1,009

Adjusted operating cash flow: renewed growth dynamics

22

Unfavorable volume impact, mainly in water (continued commercial erosion in French water), offset by the start up of waste assets

Positive price impact, net of cost inflation

Strong positive impact from cost cuttingVEOLIA KEY FIGURES AS OF JUNE 30, 2014

930

1,009

40 12

96

13

4016

H1 2013 Adj. Op.Cash Flow

FX Dalkia France(weather & end

cogen contracts)

Proactiva Volumes /construction

Price, net of costinflation

Cost cutting &other

H1 2014 Adj. Op.Cash Flow

‐1.8

Adjusted operating cash flow grew 8.5%, or +9.9% at constant exchange rates

Solid adjusted operating income growth despite the unfavorable weather impact on Dalkia International’s results

o Adjusted operating income of €564M, up 5.8% at constant FX compared to €541M at June 30, 2013

o Net charges to provisions: -€17M versus +€45M in H1 2013 (pension provision reversal in 2013)o Share of net income of JVs and associates excluding capital gains down Y-Y due to significant

negative weather impact in Dalkia International ops

23

(1) See Appendix 2(2) Including €4M for fully consolidated companies and €53M in JVs (of which Marius Pedersen +€49M)(3) Including charges related to voluntary departure plans not included in adjusted operating income (-€32M in H1 2013 and -€22M in H1 2014)(4) Including 2013/2014 net pension provision reversal impact of negative €32M(5) Including share of adjusted net income of joint ventures and associates

In €MH1 2013

re-presented (1)H1 2014 ∆ ∆

constant FX

Adjusted operating cash flow 930 1,009 +8.5% +9.9%

Depreciation & amortization -563 -555

Net capital gains (2) +17 +57

Provisions, fair value adjustments and other (3)(4) +45 -17

Share of adjusted net income of joint ventures and associates (excluding capital gains on divestments)

+112 +70

Adjusted operating income (5) 541 564 +4.3% +5.8%


Reduced net financing costs

24

(1) Excluding financial costs of discontinued operations and excluding costs of bond buybacks (treated as a non-recurring item) (2) Net financial debt represents gross financial debt (non-current borrowings, current borrowings and bank overdrafts and other cash position

items), net of cash and cash equivalents and excluding fair value adjustments of derivatives hedging debt.(3) Average net financial debt is the average of monthly net debt during the period(4) Excluding bank overdrafts(5) Excluding the impact of the integration of Proactiva debt, the borrowing rate of net financial debt is 5.03%, and is 3.94% for gross debt


In €M H1 2013 H1 2014

Cost of net financial debt -305.6 -226.6

Cost of net financial debt re-presented to calculate borrowing rate (1) -263.8 5.16% -221.5 5.16% (5)

In €M H1 2013 H1 2014

Closing net financial debt (2) 10,031 8,646

Average net financial debt (3) 10,221 8,586

Average gross debt (4) 14,906 11,712

Gross cost of borrowing 3.73% 4.04%(5)

Average cash balance 5,053 3,547

Rate 0.68% 0.90%

RATING• Moody’s : P‐2/ Baa1 stable outlook

• Standard & Poor’s : A‐2 / BBB negative outlook

Reduction in adjusted tax rate

25

The company’s adjusted tax rate was 35.3% at June 30, 2014 vs. re‐presented 42.2% at June 30, 2013

In €MIncome base before taxes

Taxes

Effective 260.9 ‐100.1

Restructuring 24.0 ‐0.4

Adjusted 284.9 ‐100.5


Significant increase in adjusted net income

26

In €M H1 2013(1) H1 2014 ∆ constant FX

Adjusted operating income (2) 541 564 +5.8%

Net financial costs (3) -249 -210

Income tax expense -76 -101

Non-controlling interests -82 -66

Adjusted net income attributable to owners of the Company

134 187 +40%(4)

(1) See Appendix 2(2) Including share of adjusted net income of joint ventures and associates considered as core Company activities(3) Including other financial income and expenses(4) At current consolidation scope and exchange rates


H1 2013 re-presented(1)

H1 2014

Adjusted net income attrib. to owners of the Co. 134 187

Non-recurring items

Of which: Goodwill impairments -48 -2

Charges related to departure plans -17 -24

Net income from discontinued operations -16 -22

Others(2) -52 12

Published net income attrib. to owners of the Co. 1 151

Reduced impact of non-recurring items

27

(1) See Appendix 2(2) Includes -€43M cost of bond buybacks in H1 2013


Net FCF(1) improvement of roughly €400M in H1

28

o Net FCF(1 & 2) improvement of €400M Negative FCF in H1 (WCR seasonality) … but significantly improved compared to H1

2013 due to higher adjusted operating cash flow, capex discipline, improved WCR and lower financial expense

o Continued capex discipline: Gross industrial investments down by 5% (mainly

France, Dalkia, the US and Canada)

o Net financial debt of €8.6 billion Slightly higher compared to Dec. 31, 2013 due

to seasonality of operating working capital

(1) Cash flow before net financial divestments and after payment of financial expense and taxes represents the sum of adjusted operating cash flow and operating cash flow from financing activities, dividends received from joint ventures, principal payments on operating financial assets, changes in working capital for operations and industrial investments and industrial divestitures, excluding net industrial investments of discontinued operations.

(2) Excluding the hybrid issuance in euros and pound sterling of €1,454M (including coupons paid) in January 2013

10,0318,177 8,646

June 30, 2013 Dec. 31, 2103 June 30, 2014

Net financial debt (€M)


Significant improvement in net FCF(1)

29

Net FCF excluding divestments & acquisitions, before dividends: - €163M

(1) Cash flow before net financial divestments and after payment of financial expense and taxes represents the sum of adjusted operating cash flow and operating cash flow from financing activities, dividends received from joint ventures, principal payments on operating financial assets, changes in working capital for operations and industrial investments and industrial divestitures, excluding net industrial investments of discontinued operations.

-563

-163

+71

+23+166

+127

+39 -26

Net 1H13 FCFOp. Cash Flow

Bef. ∆ WCR Net capex ∆ Oper. WCR Financial expense TaxesDividendsreceived Net 1H14 FCF

‐1.8


Change in net financial debt


Net FCF excluding divestments & acquisitions, before dividends : - €163M

ADJUSTED NET FINANCIAL DEBT: €5,873MADJUSTED LEVERAGE RATIO: 2.8X

8,177

8,646

1,052

49 282

425

562

195

82129 315

11727

NFD 12/31/13

Op. Cash Flow

Bef. ∆ WCR Net capex ∆ oper. WCR Interest Taxes Div received Finan capex Finan. divests

Div paid(incl.minos &

hybrid) FX Other NFD 6/30/14

‐1.8

Continued asset divestments €311M divested in the first half of 2014

Marius Pedersen for €240M

Divestments in process (enterprise value):Veolia Israel: €250MPoland waste: €19MMorocco water: proposed acquisition by municipalitiesTransdev / SNCM

Acquisitions/ minority buybacksBuy the 9.5% stake owned by IFC in Veolia Voda (Water, Czech Republic) for €91M

Acquisition of 51% of the Kendall cogeneration plant in the Boston region in the US for €19M (with the option to move up to 100% on the same basis)

Asset arbitrage

VEOLIA KEY FIGURES AS OF JUNE 30, 2014 31

In €M

H1 2013 re-presented

H1 2014 constant FX in H1

constant FX in Q1

constant FX in Q2

Revenue 11,715 11,764 +2.2% +1.0% +3.4%

Adjusted operating cash flow 1,113 1,153 +5.3% -1.5% +16.9%

Gross industrial investments including new OFAs

609 592 NA NA NA

Pro Forma group figures including DalkiaInternational at 100% & excluding Dalkia France


Reconfirmed 2014 objectives

33

2014 Objectives (1)

• Revenue growth

• Around 10% growth in adjusted operating cash flow at constant exchange rates

• Significant growth in adjusted operating income

• Reduction in financial expense

• Significant growth in adjusted net income

Continuing focus on capex management and growing cash generation

(1) At constant exchange rates


(1) Excluding debt reduction of €1.4 billion related to the exit of the Berlin contract (2) Before closing exchange rate impact(3) Net of implementation costs, of which, due to new accounting standards for joint ventures, ~80% will benefit adjusted operating income. (4) Subject to the approval of Veolia’s Board of Directors and the Annual General Shareholders Meeting(5) In cash or shares(6) Adjusted net financial debt /(Operating cash flow before changes in working capital + OFA repayments)(7) +/‐5%

2012‐2013 :Transformation

periodObjectives achieved

• €5 billion in divestments (1)

• 2013 net financial debt under new accounting standards:o Net financial debt between €8bn and €9bn(2)o Adjusted net financial debt between €6bn and €7bn(2)

• Cost reductions:o in 2013: €170 M net cumulative impact(3)

• Extended dividend commitment of €0.70(4) per share in 2013(5) and 2014(5)

Beginning 2015

• Average organic revenue growth> 3% per year (mid‐cycle)

• Average adjusted operating cash flow growth > 5% per year (mid‐cycle)

• Leverage ratio(6) of 3.0x(7)

• Mid‐term: payout ratio in line with historic level

• Cost reductions in 2015: €750M net cumulative impact(3)

Mid-term objectives


Appendices

Appendix 1: Currency movements

36

Main currencies

1€ = xxx of foreign currency

H1 2014 H1 2013 Δ 2014 vs. 2013

US dollarAverage rateClosing rate

1.3701.366

1.3141.308

+4.3%+4.4%

UK pound sterlingAverage rateClosing rate

0.8210.802

0.8510.857

‐3.5%‐6.4%

Australian dollarAverage rateClosing rate

1.4991.454

1.2961.417

+15.7%+2.6%

Czech crownAverage rateClosing rate

27.44427.453

25.69525.949

+6.8%+5.8%

The average rate applies to the income statement and statement of cash flowsThe closing rate applies to the balance sheet


Appendix 2: Main 1H13 figures re-presented for IFRS (4)


In € M6M ended June 30,

2013Published

IFRS5 Adjustment(1)

6M ended June, 2013

Re‐presented

Revenue 11,073.8 ‐ 11,073.8

Adjusted operating cash flow 930.0 ‐ 930.0

Operating income 363.9 ‐ 363.9

Operating income after share of net income of equity‐accounted entities (2)

473.0 +2.7 475.7

Adjusted operating income (3) 538.6 +2.7 541.3

Net income – Group share 3.6 ‐2.8 0.8

Adjusted net income – Group share 131.1 +2.7 133.8

Gross investments 634 ‐ 634

Free Cash Flow 556 ‐ 556

Net Financial Debt 10,031 ‐ 10,031

Loans granted to joint ventures 3,302 ‐ 3,302

Adjusted Net Financial Debt 6,729 ‐ 6,729

(1) Reclassification of the Veolia Transdev joint venture contribution into “Share of net income (loss) of other equity-accounted entities” in continuing operations (2) Including the re-presented share of net income of joint ventures and associates for the six months ended June 30, 2013(3) Including the re-presented share of adjusted net income of joint ventures and associates for the six months ended June 30, 2013(4) Non audited figures

Appendix 3: Quarterly revenue by segment

38

(1) See Appendix 2

1st quarter 2nd quarter 1st half

In €M 2013

Re-presented (1)

2014∆

constant scope &

FX

2013

Re-presented (1)

2014∆

constant scope &

FX

2013

Re-presented

(1)

2014∆

constant scope &

FX

France 1,366 1,370 +0.3% 1,416 1,395 -1.5% 2,782 2,765 -0.6%

Europe excl. France

1,171 1,218 +4.3% 1,195 1,209 +0.6% 2,366 2,427 +2.4%

Rest of World 941 1,106 +11.1% 943 1,056 +5.0% 1,884 2,162 +8.0%

Global Businesses

986 956 -0.7% 1,014 1,146 +16.0% 2,000 2,102 +7.8%

Dalkia 1,179 934 -20.5% 645 618 -3.8% 1,824 1,552 -14.6%

Other 114 104 -9.6% 104 119 -7.9% 218 224 -8.8%

Company 5,757 5,688 -1.7% 5,317 5,543 +3.1% 11,074 11,232 +0.6%


Appendix 3: Quarterly revenue by business

39

(1) See Appendix 2

1st quarter 2nd quarter 1st half

In €M 2013

Re-presented (1)

2014∆

constant scope &

FX

2013

Re-presented (1)

2014∆

constant scope &

FX

2013

Re-presented (1)

2014∆

constant scope &

FX

Water 2,494 2,492 +0.9% 2,507 2,621 +5.2% 5,000 5,113 +3.1%

Waste 1,932 2,024 +3.3% 2,052 2,151 +2.5% 3,985 4,175 +2.8%

Energy Services

1,268 1,116 -14.2% 705 718 -2.8% 1,972 1,834 -10.1%

Other 63 56 -10.7% 53 53 +0.2% 117 110 -5.8%

Company 5,757 5,688 -1.7% 5,317 5,543 +3.1% 11,074 11,232 +0.6%


Appendix 4: Back to revenue growth

40

Good commercial momentum outside France (including start up of waste assets)

Strong growth in Construction activities (VWS and Sade)

Favorable price impact despite the decline in scrap metal prices

Dalkia France: weather impacts and end of gas cogeneration contracts VEOLIA KEY FIGURES AS OF JUNE 30, 2014

11,074

11,232

244

200

9456

170

266

H1 2013Revenue

FX Dalkia France Proactiva Volumes /Construction

Price impact Other H1 2014Revenue

‐1.8

Appendix 5: Waste – revenue breakdown by activity

41

1st Half 2013 1st Half 2014

Appendix 6: Waste – Revenue vs. Industrial Production


Weighted average industrial production indices for 4 key countries including SARP/SARPI: France, U.K. (excl. PFIs), Germany, and North America (excl. US Solid Waste and WTE beginning 2012)Sources: Until March 2014 OECD

2Q 2014: Average for the last three months OECD data for the US, France, Germany and U.K.

Appendix 7 : Waste – Evolution of raw materials prices (paper, cardboard, scrap metals)


Evolution of raw materials prices (€/t)

Appendix 8: Efficiency plan

44

€53M in gross savings in H1 2014

25%

47%

25%

3%

Water

Waste

Energy Services

HQ

25%

15%

38%

18% 6% 2%

Purchasing

Contract or entity modification

Technical optimization

Organizational efficiency

Reduction of external expenses

Insurance & RiskVEOLIA KEY FIGURES AS OF JUNE 30, 2014

Appendix 9: Gross investments by business

45

Growth

In €MMaintenance

New Operating Financial Assets Industrial

Financial incl. ∆ in scope* Total

Water 62 23 111 99 295

Waste 102 28 123 4 257

Energy Services 17 27 56 20 120

Other** 17 - 13 6 36

Total H1 2014 198 78 303 129 708

Total H1 2013 re-presented 207 76 329 22 634


* Including partial acquisitions between shareholders with no change in control

** Including Proactiva

Appendix 10: Statement of cash flows

46

En M€ H1 2013 H1 2014

Operating cash flow before changes in working capital (1) 989 1,049

Reimbursement of operating financial assets 95 92

Total cash generation 1,084 1,141

Gross Investments -634 -708

Variation of working capital -749 -586

Taxes paid -123 -83

Interest expense -334 -206

Dividends (2) -172 -247

Dividends received from joint ventures and associates (3) +76 +50

Others (4) +1,116 -97

Divestments +292 +311

Free cash flow 556 -425

Impact of exchange rates +160 -117

Others +75 +73

Change in net financial debt -791 +469

Net financial debt 10,031 8,646

Loans granted to joint ventures 3,302 2,773

Adjusted net financial debt 6,729 5,873

(1) Including financial cash flows and operating cash flow from discontinued operations (2) Dividends paid to shareholders and non‐controlling interests(3) Including dividends received: China €19M(4) Includes primarily the hybrid coupon payment for ‐€68M in H1 2014


Appendix 11: Debt management (1/2)

47

o Arrival at term on April 24, 2014 of the 2014 euro-denominated bond with nominal value of €575M

o Group liquidity: €7.2 billion, including €4.4 billion in undrawn confirmed credit lines (without disruptive covenants)

o Net Group liquidity: €4.1 billion

o Average maturity of net financial debt: 9.1 years as of June 30, 2014 versus 10.1 years at the end of 2013. Average maturity of gross debt: 6.9 years as of June 30, 2014 vs. 6.8 years ad the end of 2013.

EUR 44%

USD 7%

GBP 18%

RMB 3%

HKD 8%

PLN 7%AUD 3%

Others 10%Fixed rate : 82%

Variable rate: 18 %

(*) before non active caps at June 30, 2014


Net financial debt after hedges at June 30, 2014 (*)

Currency breakdown of gross debt (after hedges) at June 30, 2014(*)

Appendix 11: Debt management (2/2)

48

0

100

200

300

400

500

600

700

800

900

1000EUR GBP USD CNY 2014 amortization


Appendix 12: Net liquidity

49

December 31, 2013 June 30, 2014

Veolia

Syndicated credit lines 3,000.0 2,962.5

Bilateral credit lines 975.0 975.0

Lines of credit 350.2 414.1

Cash and cash equivalents 3,670.4 2,317.0

Total Veolia 7,995.6 6,668.6

Subsidiaries

Cash and cash equivalents 604.0 557.8

Total Subsidiaries 604.0 557.8

Total Group liquidity 8,599.6 7,226.4

Current liabilities and bank overdrafts 3,128.9 3,127.6

Total Group net liquidity 5,470.7 4,098.8


Appendix 13: Consolidated statement of financial position

50

December 31, 2013 June 30, 2014

Intangible assets 6,305 6,362Property, Plant & equipment 4,161 4,021Other non-current assets 6,940 5,983

Operating financial assets (current and non-current) 1,796 1,805

Cash and cash equivalents 4,274 2,875Other current assets 12,766 13,719Total Assets 36,242 34,765

Capital (including non-controlling interests) 9,683 9,578

Financial debt (current and non-current) 12,626 11,624Other non-current liabilities 2,643 2,726Other current liabilities 11,290 10,837Total Liabilities 36,242 34,765


Investor Relations contact information

51

http://www.finance.veolia.com

Terri Anne PowersDirector of North American Investor Relations

200 East Randolph Street, Suite 7900 ‐ Chicago, IL 60601Tel : +1 (312) 552 2890Fax : +1 (312) 552 2866

e‐mail : [email protected]

Ariane de LamazeTelephone : +33 1 71 75 06 00

Fax : +33 1 71 75 10 12 e‐mail : ariane.de‐[email protected], avenue Kléber ‐ 75116 Paris ‐ France

Ronald WasylecSenior Vice President, Investor RelationsTelephone : +33 1 71 75 12 23

e‐mail : [email protected]


2014 First Half Results - Veolia · Next and final step Transdev / SNCM A more focused Company with...

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